India considers gold import ban?

Jewellers and gold dealers in India are concerned about a possible import ban on gold, according to the Economic Times of India. The India Bullion & Jewellers Association (IBJA) recently sent a notice to all 2,500 members that the government is considering banning gold imports for the remainder of fiscal year 2017. This could cause jewellers and gold dealers major problems, as the fourth quarter is traditionally the busiest month for the Indian gold market.

According to the latest rumors, the government not only wants to ban the import of gold, but also wants jewellers to hand in their large 500 and 1,000 rupee notes earlier.

"We hear from various circles about these possibilities [the import ban on gold and bringing forward the last return date of large banknotes], but nothing has been officially confirmed yet", said Surendra Mehta of the organization for jewelers and gold dealers. "Our organisation does support the government's plans to tackle black money and has therefore informed its members about the possibility of such an action. We have asked our members to support the government in this."

Import ban on gold?

The government wants to prevent gold dealers and jewellers from importing gold and then reselling it at an extremely high premium. After the invalidation of the 500 and 1,000 rupee banknotes, the gold price rose to almost 50,000 rupees per 10 grams, while the global market price was below 30,000 rupees per 10 grams of gold at the time.

"If the government wants to tackle these abuses, it should consider an import ban on gold. The alternative is to declare all large banknotes invalid for jewellers earlier, so that the import of gold does not have to be banned.", Surendra Mehta told the Economic Times of India.

On social media and on Whatsapp , Indian gold traders and jewellers share their concerns about the measures that the government may take to tackle black money. Jewellers who still accept 1,000 and 500 rupee notes from customers are breaking the law and risk a high fine. To hedge that risk, they charge a very high premium compared to the gold price.

Smuggling

Traders expect that an import ban on gold will immediately lead to an increase in the illegal supply of smuggled gold. That will only become more lucrative, now that Indians are willing to pay very high premiums on top of the global gold rate. In addition to the import of 700 to 750 tons of gold through official channels, an estimated 100 to 120 tons of gold enter the country illegally on an annual basis. The smuggling of gold is still very lucrative because of the 10% import duty on precious metals.

India Considers Gold Import Ban