Has this news below been factored in for gold like tapering must be after 6 months of hearing little else? I doubt it. They won't thrash this to death like they have tapering.
"India's finance ministry, fighting a crippling current account deficit and a weakening currency, implemented various measures stop citizens from importing gold over the last year and more.
Gold import duties have been pushed up tenfold – from 1% at the start of 2012 to 10% today. Excise duties now stand at 9% while new rules such as strictly cash only for imports, a rule that calls for the re-export of 20% of all imports, transaction taxes and even bans on gold-backed exchange traded fund investments have stymied India's gold industry.
But the government import restrictions have led to a scarcity of physical gold inside the country which increased smuggling activity and sent premiums paid over the London price to rocket to as much as $130 an ounce.
The gold trade employ three million Indians and with activity so low, even during the recent festivals, some gold shops have been forced to quit the market or idle their businesses.
The Economic Times reports Monday, quoting an official from the ministry, that the economic situation has improved to such an extent – including a 10% appreciation in the rupee from record low in August – that some curbs may be lifted and others eased by the end of the year.
"There have been several representations," said the official cited above, adding that a call will have to be taken based on several factors, including the degree of the threat to CAD, the impact on duty collections as gold imports shift to unofficial channels and the effect on employment. Gold traders and jewellery exporters have lobbied hard with the government for the easing of the import compression measures, arguing that they had fuelled the grey market and hurt trade badly.
No doubt there is a political angle to easing the restrictions too after India’s ruling Congress Party were roiled in state elections last week – losing the three large states of Rajasthan, Madhya Pradesh and Chhattisgarh – ahead of general elections set for 2014.
According to some estimates about 400 tonnes of recycled gold to enter the market this fiscal year to March 2014, compared with normal rates of about 130 tonnes, according to Thomson Reuters GFMS data.
India's 330 million households are hoarding 18,000 – 20,000 metric tonnes of gold worth some $900 billion at today's prices, representing almost 50% of the country's GDP."
With elections coming up, I think they are likely to ease restrictions soon. "India’s ruling Congress Party were roiled in state elections last week – losing the three large states of Rajasthan, Madhya Pradesh and Chhattisgarh – ahead of general elections set for 2014." I wonder how much pent up demand there will be. Westerners sell their ETF's. How much of that is due to the media? There always will be real consumer demand and it grew strongly in 2013 despite Indian restrictions. That news doesn’t hit the headlines daily like tapering does. IMO all evidence points to; Consumer demand is likely to continue to grow while ETF selling will likely slow. Why does ETF selling have to slow? “The pace of ETP outflows has slowed to about 40.7 tons a month on average since June, compared with 97.7 tons a month in the first half, according to data compiled by Bloomberg. Holdings fell 28.3 tons this month. The amount held in ETPs reached a record 2,632.52 tons on Dec. 20 last year.” They are now “down to 1,813.7 metric tons” This means ETF holdings fell by 819t or 31%. Even if another 31% is sold over the next 12 months, 31% of the now lower base of 1813t would be only 562t or 256t less than for 2013. What happens when this reduced supply is met by increased consumer demand? The Chinese soaked up all the increased supply in 2013. ETF selling can only influence the price for a limited time. Is time nearly up? 2000/2001 shows us gold stocks can bottom months before gold. http://hotcopper.com.au/post_single.asp?fid=1&tid=2154819&msgid=12699113#.UrF3XiflMpo
ABU Price at posting:
2.3¢ Sentiment: Buy Disclosure: Held
(20min delay)