Tag Archives: gold jewelry

India’s Hidden Demand For Gold

Western anti-gold propagandists have been scratching their head over the surprising strength in the gold market despite aggressive Central Bank efforts to push the price lower. Here’s a perfect example of the idiotic articles hitting the internet – this one from Investing.com:  Bring Out The Bears:  Gold Is Headed Lower.  This author refers to gold as “the shiny rock.”

Anyone who’s traded gold for a reasonable length of time knows that simple T/A applications are utterly useless.  This author’s work is T/A scatology.  I see he operates something called “Dragonfly Capital.” Dear god I hope he’s not responsible for managing other people’s money…

The recent strength in gold is widely being attributed to vigorous “western” demand. Other than the fictitious run-up in GLD’s reported vault holdings, and the record Q1 2016 quarterly demand for U.S. minted gold eagles, it’s hard to see whether or not the west is buying up a lot of physical gold or not.

However it’s been assumed that since early March that India was dormant for several reasons, not the least of which is a general jeweler’s strike over the excise tax implemented on jewelry sales.  However these jewelers still have to make a living.

John Brimelow – JB’s Gold Jottings report – featured an article from India which reports that “unofficial” imports of gold into India – aka “smuggled gold” – are estimated to be around 2.5 tonnes per week.  Based on the numerous other reports published by JBGT, estimates of smuggled gold into India tend to understate the true amount of smuggling.  One of the the benefits to jewelers to using smuggled metal is that they avoid paying import duties and the associated premiums over the spot price, and thereby offset the excise tax.

With the dramatic run-up in paper derivative forms of gold relative to the amount of physical gold available to deliver into those paper claims, it would be a grave mistake for the bullion banks to underestimate the amount of physical gold disappearing into private hands.

India Expected To Import At Least 100 Tonnes Of Gold In March

Unofficially India imported about 25 tonnes in February, as buyers waited to see if the Government would reduce the 10% import duty imposed by the previous Government in July 2013.   But Bloomberg is reporting that “snap-back” demand could boost India’s imports to 100 tonnes in March as India heads into another festival season – Bloomberg link.

As John Brimelow of JB’s Gold Jottings avers:

India in November demonstrated an ability to import prodigious quantities of gold legally even with duty at an effective 10.3%. This could happen again with weak world gold or, just as possible, a strong rupee. For the immediate future the question is if Indian demand really was inhibited by the prospect of lower duty…

That last sentence references the fact that including smuggled gold, it’s not clear if the 10% import duty actually reduced the amount of gold that entered India either officially or “unofficially.”   Of course, the World Gold Council will only use the official numbers and will completely disregard any reference to smuggled gold.

Meanwhile India announced plans to try and monetize India’s gold stock by introducing gold deposit accounts that would pay interest on gold deposited into the accounts and by introducing a “sovereign gold bond” which would be gold-backed bonds that pay interest and would be redeemable in cash.  It’s my view that this “monetization” scheme will be fail miserably, as Indians – more than any other culture – demand gold that is delivered to their possession in the form of coins and jewelry.

I really can’t figure out the motive of the Indian Government in introducing this “monetization”  idea other than, despite being a BRICS member, India’s Government occasionally plays the role of a lap-dog to the U.S. and England.  The Bank of England and the Fed have been aggressively pushing a fractional gold system on India for quite some now.  Clearly the west desperate to divert as much global capital as possible away from buying deliverable physical gold and into paper gold derivatives.  This plan in India will be a colossal failure.