More unsettling rumours circulating for the gold market this past week. With local press issuing a brief but dire warning on demand in the world’s most important consuming center.
Papers reported Friday that India’s government is considering restrictions on local holdings of gold. With those reports just now leaking into the Western press. Here’s what Reuters said about the speculations:
“The government may impose curbs on domestic holdings of gold as Prime Minister Narendra Modi intensifies a fight against ‘black money’, news agency NewsRise reported, citing an unnamed finance ministry official.”
That’s all we’ve got right so far. With these vague reports suggesting that India’s government may move to limit just how much gold its citizens are allowed to keep.
Such a move would be consistent with reports earlier this month that the Indian government was considering restrictions on the import of gold into the country. Also apparently a consequence of the current drive to combat illegal money across the nation.
Directly limiting personal holdings of gold would be a big step beyond that. With such a move obviously having major consequences for gold demand in India — and the world overall.
It’s unclear how the government would pull off such sweeping legislation. In a place where gold ownership is a longstanding and widespread tradition.
Officials might try to prompt India’s citizens to own gold through the recently-developed gold-backed bonds. Where interest-bearing certificates are issued, equivalent to a given amount of bullion.
Even that approach however, would likely be a tough sell. With such paper ownership of gold running contrary to the reasons many people hold bullion — namely, having a free currency readily accessible at hand.
Of course, the recent reports could simply be unfounded rumours arising from hysteria around the current black money campaign. Watch for more word from India’s government on any concrete measures.
Here’s to not killing the golden goose,
Article by Pierce Points