Courtesy of Mish.
Capital controls limiting imports of gold into India led to four easily predictable results:
- Short supplies
- Higher prices
- Flourishing black market
- Government decree did not reduce demand
For the story behind the story, please see Official Denials Run Rampant in India; “No Question” of Economic Crisis; Rupee Plunges to Record Low; Gold Coin Imports Banned.
Gold Coins Vanish, Melted to Make Jewelry
As a result of import restrictions and capitals controls Jewelers are melting whatever gold coins they have to sell more expensive jewelry, thus gold coins have vanished in India.
Gold coins will not be available this Dhanteras and Diwali season beginning October last week. This is because jewellers have decided not to sell coins, and instead divert them to jewellery-making to meet the shortage arising from the government’s curbs on imports of the yellow metal.
Coin sales reach their peak during the Diwali season every year as corporates, businessmen and people buy coins for gifting purpose. Banks and organized players have already stopped selling coins.
“We won’t be selling coins,” says Bhaskar Bhat, Managing Director at Titan Company which owns the jewellery brand, Tanishq.
India was the top fabricator and consumer of gold jewellery in 2012, accounting for nearly one third of global fabrication and consumer demand. India and China together account for more than half of global gold jewellery fabrication and consumption demand.
Not Much of a Festival Season
Also consider Not Much of a Festival Season as Gold Runs Dry
In India’s biggest bullion market, Mumbai’s Zaveri Bazaar, gold dealers are busy — not filling orders for customers, but busy avoiding phone calls because they don’t have any gold to sell.
Battling a huge trade deficit and a weak currency, the government has taken various steps this year to make it harder and more expensive for Indians to get hold of gold, the biggest item on the country’s import bill after oil.
Hardly any gold came in for two months until mid-September and industry is still feeling the pinch, especially now the festival season has started, a peak period for demand.
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