In­dia’s gold traders on edge as Modi fights ‘black money’

Kuwait Times - - BUSINESS -

NEW DELHI: Some In­dian gold traders are plac­ing bulk, short-term im­port or­ders on fears that Prime Min­is­ter Naren­dra Modi might soon add curbs on over­seas pur­chases of the metal to his with­drawal of high­de­nom­i­na­tion ban­knotes in his fight against ‘black money’, traders and jewel­ers said. In­dia is the world’s sec­ond big­gest gold buyer, and it is es­ti­mated that one-third of its an­nual de­mand of up to 1,000 tons is paid for in black money - un­taxed funds held in se­cret by ci­ti­zens in cash that don’t ap­pear in any of­fi­cial ac­counts.

Modi has said he may not stop at the shock cur­rency move that has led to a mas­sive cash short­age, but has not made clear what his next step would be in his drive to un­cover the wealth. That un­cer­tainty is likely to cre­ate sharp swings in pur­chases, af­fect­ing world prices. “We’re un­cer­tain about what the govern­ment will do next,” said Da­man Prakash Rathod, a di­rec­tor at MNC Bul­lion in the south­ern city of Chennai. “No le­gal busi­ness trader is will­ing to risk very big quan­tity. (Some) want to buy 2-3 kgs ex­tra so that in fu­ture they could con­duct their busi­ness for a month or two un­til the sit­u­a­tion is sorted out.”

Pan­icked gold traders and jewel­ers have cir­cu­lated mes­sages amongst them­selves say­ing the govern­ment could ban im­port of gold for do­mes­tic use from early next year to March, ac­cord­ing to sev­eral jewel­ers in New Delhi and Mum­bai who have seen the mes­sage. In­dia’s on­go­ing wed­ding sea­son - tra­di­tion­ally a fo­cus for gift­ing gold - is fu­elling the disquiet. The All In­dia Gems and Jew­elry Trade Fed­er­a­tion dis­missed the mes­sages among traders as a ru­mor, but some are nev­er­the­less buy­ing ex­tra gold for the wed­ding sea­son and to see them­selves through the next few months, said an of­fi­cial with the In­dia Bul­lion And Jewel­ers As­so­ci­a­tion. A fi­nance min­istry spokesman did not im­me­di­ately re­spond to a re­quest for comment.

‘50 pct pre­mium’

One senior of­fi­cial in­volved with govern­ment pol­icy-mak­ing on gold said there has been no dis­cus­sion on im­port curbs but that sup­ply has gone up through “un­of­fi­cial chan­nels”. “If you see the pre­mi­ums, you know that there is de­mand,” the of­fi­cial said, speak­ing on con­di­tion of anonymity. In do­mes­tic mar­kets, jewel­ers are charg­ing pre­mi­ums of as high as 50 per­cent but have not com­mit­ted to buy any new gold, said sev­eral jewel­ers who de­clined to be iden­ti­fied. The cash crunch has badly hit de­mand in ru­ral ar­eas, which ac­count for two-thirds of to­tal de­mand. But in the main gold mar­kets of Zaveri Bazaar in Mum­bai and Karol Bagh in New Delhi, there are ready buy­ers of the metal will­ing to pay in the old bills.

The cur­rent rate in the trade - il­le­gal since Modi’s Nov 15 move to with­draw the notes - is 45,000 ru­pees ($663) per 10 gms in Karol Bagh, 53 per­cent higher than the of­fi­cial price, said one jew­eler who has been in the trade for 14 years. The rate is sim­i­lar in Zaveri Bazaar. “I’m get­ting non-stop calls from un­known num­bers from peo­ple ask­ing for gold,” the jew­eller told a Reuters re­porter in an in­ter­view in­side his shut­tered show­room. “A client last week left a bag full of a few lakh ru­pees (1 lakh = 100,000 ru­pees) out­side our show­room say­ing that he had left his (dues) for us to pick up or throw out,” the jew­eler said. “If you see, 750 tons used to be the to­tal im­port a year, this must have hap­pened in the last few days alone.”—Reuters

KOLKATA: A man holds a charred fac­sim­ile of the dis­con­tin­ued In­dian cur­rency 500 note after a protest by a traders as­so­ci­a­tion de­mand­ing ad­e­quate ar­range­ment to ex­change dis­con­tin­ued cur­rency notes out­side Re­serve Bank of In­dia in Kolkata yes­ter­day.

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