Daily Market Update

Gold Bullion Coins Import Ban Continues In India

Today’s AM fix was USD 1,333.00, EUR 968.68 and GBP 825.13 per ounce.
Yesterday’s AM fix was USD 1,311.75, EUR 959.51 and GBP 813.24 per ounce.

Gold climbed $25.00 or 1.09% yesterday, closing at $1,340.20/oz. Silver surged $0.49 or 2.21% closing at $22.68. Platinum rose $12.10 or 0% to $1,447.80/oz, while palladium climbed $2.65 or 0.4% to $751.90/oz.

Gold was trading near its highest in four weeks on Wednesday. As expected, the poor U.S. jobs data led to safe haven buying. Contrary to the constant silly ‘taper’ talk, it appears more and more likely by the day that the Federal Reserve will continue money printing and may even increase their $85 billion a month QE in the coming months. 

Gold in US Dollars, 1 Year – (Bloomberg)

Gold surged 2% after the poor jobs number to $1,344.46/oz – the highest since September 20.

The U.S. employment number surprised on the downside showing less jobs in September being added than in August, and there are indications that the Chinese economy is slowing down also.

Holdings in the world’s largest gold ETF, SPDR Gold Trust, surged 0.8% or 6.6 tonnes to 878.32 metric tons yesterday, the first increase seen since September 19th according to Bloomberg data.

Physical demand in China and India remains robust – particularly in India ahead of the festival season.

Indian gold premiums remain near record levels due to rising domestic demand and scant supplies as exporters get priority over shipments. The government’s misguided attempt to correct the current account balance by attacking gold buying and ownership has completely distorted the market leading to a lack of gold coins and bars which is creating panic gold buying of any gold available.

Finance Minister, Chidambaram today ruled out the possibility of lifting a ban on import of gold coins and asked banks to strictly follow guidelines restricting inward shipments of gold.

"Import of gold coins and gold medallions is prohibited. Nobody can import gold coins and medallions," he said, referring to a suggestion that the government should allow import of coins for ‘shagun’ or auspicious gift purposes.

Gold in US Dollars, 3 Years – (Bloomberg)

He said traders can buy gold from the domestic market and make coins, but the government will not relax the curbs that were imposed to contain the current account deficit

The Indian government is aiming to limit gold imports at 850 tonne this year versus 950 tonne in the same period last year. Chidambaram’s goal is to decrease the import bill by $4 billion. The government has hiked the import duty on gold to 10% and the factory gate duty on gold bars to 9%.

Soaring gold imports are cited as the primary reason that the current account deficit hit a record high of 4.8% of GDP, or $88.2 billion, in the prior fiscal year. However, India is also very dependent on oil and other energy sources and these are other important contributors to the deficit.

Gold imports surged to a high of 162.4 tonne in May despite an increase in taxes and then collapsed to 7.2 tonne in September after a restriction on gold imports and selling were implemented.

The government’s aim is for gold imports into India to decrease to 800 tonne this fiscal year.

Hopefully, other governments around the world will learn from the mistakes of the Indian government and realise that attempting to prevent people buying gold through punitive taxes and sale prohibition have failed throughout history and will always fail.

Gold Prices / Fixes/ Rates /Volume – (Bloomberg)

The best way to address the huge demand for gold in India is for the Indian government to manage the economy better, make savings more attractive and safe and control food, energy and home inflation. The other way is to make the rupee a store of value that people will trust rather than a weak and volatile paper currency that no one wishes to hold and save in.

Gold is the messenger and it is never wise to shoot the messenger. Therefore, gold should not be ‘shot’ or targeted by desperate governments. It is unfortunate, in every sense of the word when it is. We pointed this out in an  interview with Reuters in April ( ‘Gold; Savings and Gold Confiscation’ )

A healthy economy and more efficient capital markets and safer banks would gradually lead to Indian people reducing allocations to gold and trusting the rupee, stocks, bonds and other financial assets.

This is what the Indian government and indeed governments everywhere should be doing. Instead they are targeting and punishing hard working savers and rewarding speculators through ultra loose monetary policies, taxes on savings and the coming bail-in regimes. 

Governments internationally appear to be opting for financial repression and the repression of money and the two oldest forms of sound money – gold and silver. To all of our detriments.

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Gold Up 2% To Settle Near Five-Week High – Market Watch

Gold Near 4-Week Highs On U.S. Stimulus Bets – Reuters

Gold Trades Near Three-Week High As Fed May Maintain Bond Buying – Bloomberg

Ban On Import Of Gold Coins And Medallions To Stay – Economic Times

Fed Won’t Raise U.S. Rates Until Well Into 2015, Traders Bet – Retuers

Australia To Raise Debt Limit By Two-Thirds To A$500bn – BBC

Is The Silver Bull Market Over? – SilverSeek

Video: Keiser & Gurdgiev Bandits, Bankers & Brokers – Max Keiser

What The Republican Civil War Means For Gold – Dollar Collapse

Gold And Silver Rise On Poor Jobs Report – Harvey Organ

Record Surge In Treasury Debt – Wall Street Selector Selector

For breaking news and commentary on financial markets and gold, follow us on Twitter.

Mark O'Byrne
Executive Director


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