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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Are More Troubles Coming For This Critical Gold Center?

Very significant news emerging this week for the gold market.

From one of the biggest consuming nations on the planet.

That’s India. Where reports from local press suggest that the government may once again tighten restrictions on gold imports into the country.

Related: Mick Davis has now almost $5 billion to build new mining empire

Officials are reportedly looking at re-instating the so-called “80:20 rule” on imports. Under which importers of gold were required to re-export 20% of the supply they brought in from abroad.

The 80:20 rule was formally relaxed last May after being in force for a year. A move that has allowed a number of “nominated” agencies in India to more-freely import bullion over the last few months.

That’s had a notable effect on gold consumption from Indian consumers. With September’s imports recently reported at $3.8 billion—up 450% from the year-ago period.

But the uptick in gold imports has also caused troubles—notably for India’s trade deficit. Which hit an 18-month high of $14 billion during September.

That figure has worried India’s finance ministry. Prompting officials there to formally ask the country’s department of economic affairs and the Reserve Bank of India to look at re-imposing the 80:20 rule.

Related: Can Gold Come Back From The Brink?

The stated goal of such action would of course be to discourage gold imports. Which would provide a drag on global gold buying—and affect prices.

The move would also be a surprise to a number of observers in the gold space. Who had been expecting India to continue easing its import policies, ahead of possibly allowing more-complete freedom on shipments.

Watch for news on any decisions by economic affairs or the Reserve Bank regarding official rule changes. India’s trade deficit numbers for October could also provide some clues as to what action is coming on this front.

Here’s to gold standards,
Dave Forest

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