http://www.zerohedge.com/news/2013-09-17/india-escalates-gold-capital-controls-hikes-duty-gold-jewerly-imports-15

India Escalates Gold Capital Controls, Hikes Duty On Gold Jewelry Imports To 15%

Submitted by Tyler Durden on 09/17/2013 13:59 -0400

Anyone following the Indian economy and capital markets has been witness to what is the worst case outcome for a modern-day central banker: on one hand forced to keep inflation down, on the other fighting a fierce capital outflow which recently shocked Rupee holders by send the currency to all time lows against the dollar and sending gold priced in INR to record highs. All of this is, of course, happening as India fights tooth and nail to keep its monthly trade deficit under control, not overpay for oil, and keep businesses running now that inflation expectations are becoming unanchored. And, as we have reported previously, the biggest scapegoat to the Indian central bank and government is, understandably, gold, which has been the source of much of the population's "wealth preservation" currency outflow.

As a result, India has unleashed the most unprecedented series of gold "capital controls" ever seen in a modern nation, shy of confiscation (and even that may be imminent). Today, India added yet another more measure to its list of prohibitions that seek to minimize the size of the gold market available to citizens, yet which will only result in even more interest and demand in the yellow metal. As Reuters reports, India increased its import duty on gold jewellery from 10 percent to 15 percent, setting it higher than the duty on raw gold in a move to protect the domestic jewellery industry.

Why is the government doing this? Simple: "To protect the interests of small artisans, the customs duty on articles of jewellery ... is being increased," the ministry said.

Somehow we doubt the ministry actually cares about the small artisans as much as it cares about making gold imports even more prohibitive and which only serve to exacerbate the country's current account deficit, which in turn will inevitably result in even more USD-outflows, INR weakness, economic and market instability, more central bank intervention, the eventual selling of Treasury bonds, more gold purchases, and so on.

More on today's latest capital control move from Reuters:

The government has also curbed raw gold imports through measures including three duty hikes this year to a record 10 percent. The central bank has put tight restrictions on importers that have sharply curtailed supplies.

India imported gold jewellery worth $137.57 million between April and July - a fraction of overall bullion imports, which were valued at $2.9 billion in July alone.

The world's biggest buyer of bullion, India imported a record 162 tonnes in May, creating a headache for the government which is trying to rein in a wide current account deficit and support a weak rupee.

Gold is the biggest non-essential item in India's import bill although jewellery is a tiny fraction of the purchases.

The hike in the duty on jewellery was demanded by the domestic industry on concerns over imports of cheaper jewellery from Thailand, Malaysia and elsewhere.

"This is a good move for the local industry and it will support the manufacturing sector," said Haresh Soni, chairman of the All India Gems and Jewellery Trade Federation.

So while this latest escalation in the fight of one particular central bank with gold will merely lead to the next, we can now update our list of all capital control actions taken by India in 2013 alone, which now looks as follows.

Jan 21 - The government raises the gold import duty by 2% to 6%.
Jan 22 - The government more than doubles the duty on raw gold to 5%.
Jan 30 - Finance Minister P. Chidambaram says there are no plans for additional taxes or curbs on gold imports.
Feb 1 - The Reserve Bank of India (RBI) plans to introduce three or four gold-linked products in the next few months.
Feb 6 - The RBI says it would consider imposing value and quantity restrictions on gold imports by banks.
Feb 14 - The central bank relaxes rules on gold deposit schemes offered by banks by allowing lenders to offer the products with shorter maturities.
Feb 20 - The Trade Ministry recommends suspending cheaper gold jewellery imports from Thailand.
Feb 28 - India keeps its gold import duty unchanged in its annual national budget, defying industry expectations.
Feb 28 - India proposes a transaction tax of 0.01% on nonagricultural futures contracts, including for precious metals.
March 1 - The Finance Minister appeals to people not to buy so much gold.
March 18 - The Reserve Bank of India says it is examining banks that sell gold coins and wealth management products to identify "systemic issues", with a view to closing any legal loopholes.
April 2 - The Finance Ministry suggests it is unlikely to raise the import tax on gold further to avoid smuggling and would instead introduce inflation-indexed instruments.
May 3 - The RBI restricts the import of gold on a consignment basis by banks.
June 3 - The Finance Minister says India cannot afford high levels of gold imports and may review its import policy.
June 5 - India hikes the gold import duty by a third, to 8%.
June 21 - Reliance Capital halts gold sales and investments in its gold-backed funds.
June 24 - India's biggest jewellers' association asks members to stop selling gold bars and coins, about 35% of their business.
July 10 - India's jewellers announce they might continue a voluntary ban on sales of gold coins and bars for six months.
July 22 - The RBI moves to tighten gold imports again, making them dependent on export volumes, but offers relief to domestic sellers by lifting restrictions on credit deals.
July 31 - India hopes to contain gold imports well below the 845 tonnes that were shipped last year, the Finance Minister says.
Aug 13 - India hikes the import duty on gold for a third time in 2013, to 10%. Duties for silver and platinum are also increased to 10%. The customs duty on gold ore bars, ore, and concentrate are increased to 8% from 6%.
Aug 14 - India turns the screws on gold buying again, banning imports of coins and medallions and making domestic buyers pay cash.
Aug 29 - India considers plan to allow commercial banks to buy gold direct from ordinary citizens
Sept 19 - India hikes import duty on gold jewerly to 15%

http://www.caseyresearch.com/gsd/edition/the-world-awaits-the-end-of-q.e...but-will-it-happen

¤ YESTERDAY IN GOLD & SILVER

Gold did little of anything in Far East trading on their Tuesday, but volume was decent nonetheless. The price rallied a bit at the London open, but it didn't get too far. The high of the day appeared to come during the London lunch hour, and from there it got sold down until just past the London p.m. gold fix. From that point it chopped sideways into the 5:15 p.m. electronic close in New York. The low of the day [$1,305.30 spot] came at 12:15 p.m. EDT.

Gold finished the Tuesday session at $1,310.00 spot, down $3.90 from Monday's close. Net volume was around 142,000 contracts.

It was more or less the same trading pattern in silver as well once again. The only real difference was that the low price tick of the day [$21.55 spot] came about fifteen minutes after the Comex open in New York yesterday morning. It recovered a bit, but continued to slide into the close after that.

Silver finished the day at $21.735 spot, down 8.5 cents from Monday. Net volume was only 35,000 contracts.

The price action in platinum and palladium was somewhat more subdued. Platinum closed down a bit and palladium finished flat. Here are the charts.

The dollar index closed late on Monday EDT at 81.28. It's high tick of 81.35 came just minutes before 11 a.m. in Hong Kong trading. By half-past lunchtime in London, the index was down to 81.15. And except for a brief down/up spike in morning trading in New York, the index traded pretty flat for the remainder of the day. The index closed at the 81.15 mark, which was down thirteen basis points from Monday's close.

*****

The CME's Daily Delivery Report showed that zero gold and 57 silver contracts were posted for delivery on Thursday within the Comex-approved depositories. For the second day in a row it was Jefferies as the largest short/issuer, this time with 50 contracts. Canada's Bank of Nova Scotia and JPMorgan Chase in their client account picked up 35 and fourteen contracts respectively as the biggest long/stoppers. The link to yesterday's Issuers and Stoppers Report is here.

There were no reported changes in GLD, and as of 9:28 p.m. EDT yesterday evening, there were no reported changes in SLV, either.

The U.S. Mint had a small sales report yesterday. They sold another 2,000 ounces of gold eagles, along with another 500 1-ounce 24K gold buffaloes.

The activity in gold within the Comex-approved depositories on Monday is hardly worth mentioning. There were 2 kilo bars deposited at Brink's, Inc. and that was all.

Needless to say, it was a different story in silver. There were 857,048 troy ounces reported deposited, and 263,785 troy ounces were shipped out. The link to that action is here.

****

Selected non redundant news and views...

Gretchen Morgenson: Repo Market Might Cause Another Financial Crisis

That's the crucial vulnerability in our financial system that could cause another financial crisis, some experts worry.

In fact, former FDIC chief Sheila Blair, New York Fed Chief William Dudley and Fed Chairman Ben Bernanke have all expressed concerns about the repo market.

"Now $4.6 trillion in size, it is where almost every financial crisis since the 1980s has begun. Little has been done, however, to reduce its risks," writes New York Times columnist Gretchen Morgenson.

The repo market, also called the repurchase obligation or wholesale funding market, is the "plumbing" of our financial system, she notes Banks can finance their securities holdings cheaply, and money market funds can to put their cash to work by lending to banks and other financial players.

The problem is that the repo market is based on trust — which can disappear instantly in a panic.

This must read commentary can be found on themoneynews.com Internet site. It was posted there early yesterday morning...and it's the third contribution of the day from Elliot Simon.

Brazil Spurns U.S. State Visit Invitation Over NSA Spying

President Dilma Rousseff of Brazil has postponed a planned official visit to Washington amid fallout over revelations that the U.S. has been spying on her government, the Associated Press reports. Leaks from former-National Security Agency contractor Edward Snowden revealed, among other things, extensive spying by the U.S. on countries in Latin America, for which regional heavyweights like Mexico and Brazil already rebuked the U.S. Brazil in particular has reportedly been a primary target of NSA spying—with reports by Brazil’s Globo TV, alleging the agency had spied extensively on the internal communications of the Rousseff administration and on the country’s state-owned oil company Petrobras. The allegations awoke the region’s age-old distrust and resentment of yanqui imperialism.

Indefinitely postponing—in effect, canceling—an official state visit is a symbolic and significant move. Brazil’s last official state visit to the United States, with full state dinner and all attendant pomp and circumstance, was nearly two decades ago, in 1995. According to the Brazilian president’s office, Obama called Rousseff late Monday in an attempt to coax her into keeping to the plan, but he reportedly refused her demand that the U.S. issue an official public apology for its spying program, leading Rousseff to call off the trip.

This article was posted on the world.time.com Internet site sometime yesterday...and I thank Casey Research's own Nick Giambruno for sending it around yesterday.

Barclays Is Still Paying for Qatar's Bad 'Advice'

Barclays is off raising $9.2 billion to shore up its capital, and the prospectus has a rather awkward disclosure, which is that British regulators are planning to fine Barclays $79 million because the last time it raised a bunch of capital it maybe lied to shareholders to cover up the bribes it paid to Qatari investors to buy its shares. But that was, like, almost five years ago, so surely there are no hard feelings?

What else was happening five years ago? Bad things is the short answer; there are longer answers. Barclays needs the billions it's raising now to comply with capital requirements; it needed the billions it raised in late 2008 to survive.

It was not alone in this. If you're a bank and things have gone terribly wrong for you, one thing you might want to do is raise some money by selling stock. This can be hard because everyone tends to know that things have gone wrong for you, but they have trouble knowing how wrong, so their sensible inclination is to assume the worst. Markets for lemons, etc.

This op-ed piece by Bloomberg columnist Matt Levine is a hoot to read, as you couldn't make this stuff up if you tried. It's on the longish side, but worth it if you have the time. I thank U.A.E. reader Laurent-Patrick Gally for bringing it to our attention.

Going Nowhere: France Opts for Meek Reforms and Hope

French President François Hollande's announced reforms have either been delayed or watered down so much that they will do little to address his country's pressing problems. Fearing unrest, he prefers hope over hardship.

The weeks following the summer recess were widely expected to be a time for Hollande to set a new course. The announcement of a coming large-scale pension reform was meant to demonstrate that the president was capable of taking decisive action on a fundamental issue. But that reform, which has now been unveiled, has primarily demonstrated one thing: that Hollande doesn't believe in large-scale reform.

The pension reform didn't touch France's retirement age or the special rules that apply to government employees. Instead, both employees and employers are to pay more contributions, with the number of years of contributions required before qualifying for a full pension being raised to 43 by 2035.

Making more profound change would bring with it "the risk that many people would take to the streets, without the certainty that we would be able to see the reform through to the end," Hollande told Le Monde in justifying his decision.

This short story was posted on the German website spiegel.deyesterday...and long before you get through reading it, you'll see just how hopeless the situation is for France. Pretty much all of Europe is in this condition. I thank Roy Stephens for his second offering in today's column...and it's worth reading.

Ambrose Evans-Pritchard: My grovelling apology to Herr Schäuble

German Finance Minister Wolfgang Schäuble has been vindicated.

For my part, I have been wrong about everything. German discipline policies for the eurozone have been a tremendous success. I am ashamed for suggesting otherwise.

As the wise, patient, and always self-effacing Mr Schäuble writes today in The Financial Times, the Euro-sceptics talk and write relentless drivel.

“Ignore the doomsayers: Europe is being fixed” is the headline.

Wow! Ambrose rips Schäuble a new one in the most public dressing-down I have ever read. He pulls no punches at any point. This blog was posted on The Telegraph's website...and is amust read for sure. Many readers sent me this article yesterday, but the first one in my in-box came from Roy Stephens.

Russian ruble debuts on PayPal

The world’s biggest electronic payment system PayPal has started operating in Russian rubles, making internet purchases and money transfers easier for about a million Russians. Last year the volume of transactions in the country surpassed $1 billion.

As of September 17, users in Russia can now connect with the 164 million buyers and sellers on the eBay international auction site. The move will benefit Russian retailers who view the introduction as a positive market mover and testimony to the growth the e-commerce market has already achieved.

The PayPal deal also gives Russians more security in their online shopping, as it acts as an insurer for eBay. Whether the seller is a fraud or the product gets lost in the mail, PayPal returns money to the buyer.

This very interesting article was posted on the Russia Todaywebsite early yesterday afternoon Moscow time...and I thank reader Bob Visser for pointing it out.

Russia seeks to privatize its suffering ‘friend’ Greece

Russian investors are pursuing deals to help cash-strapped Greece privatize its economy and pay off its huge debt. Russian Railways RZD may take a 100 percent state in Greek’s TRAINOSE, and Gazprom has renewed talks with state-owned gas company DEPA.

Valentina Matviyenko, the Speaker of the upper house of Russia's Parliament has expressed her government's vested interest in the Greek economy. She's traveling with a group of Russian investors looking to to get a slice of Greece's privatization.

"Our position is that would not be an acquisition of assets, but rather a support for friendly Greece at the complicated economic stage,"Matvienko said.

This short, but very interesting article was also posted on the Russia Today website late Tuesday morning Moscow time...and I thank reader 'David in California' for sharing it with us.

'Al-Qaeda and Al-Nusra in Syria may have significant amounts of sarin'

The US military have reportedly proved that sarin gas production is going on among some Sunni salafists in Iraq, and via Turkey, can reach Syrian rebels, former Pentagon official Michael Maloof told RT, citing classified sources.

RT: France, the US and UK are saying the UN report clearly points to the Assad government's involvement in the August attack . But how can they be so sure, especially as the document states that improvised rockets may have been used, possibly pointing to rebel involvement?

Michael Maloof: I have a report from a source who has direct connections with classified information and he basically told me that [the] US military did an assessment based upon 50 indicators and clandestine interviews that the sourcing of sarin originated out of Iraq and into Turkey before some of it was confiscated in May in Turkey. He believes that since that report was disseminated in August in 2013, that there has actually been a more significant amount of sarin production both in Iraq and in Turkey going to the opposition, principally Al-Qaeda and Al-Nusra.

This story doesn't surprise me in the slightest, as I'd heard rumours of this on the Internet for a few weeks now. ThisRussia Today story from yesterday pretty much stamps "Paid" to that idea. Once again I thank Roy Stephens for digging this article up on our behalf.

UNSC resolution on Syria won’t be under Chapter 7 allowing use of force - Lavrov

The resolution that the UN Security Council is to adopt in support of the plan to destroy Syria’s chemical weapons won’t refer to Chapter 7 of the UN Charter, regulating the use of military force on behalf of the council, Sergey Lavrov says.

The foreign minister explained Russia’s position on the future document after meeting his French counterpart Laurent Fabius in Moscow.

The resolution, Lavrov stressed, is meant only to affirm the support of the UNSC to the road map for destruction of the chemical weapons stockpile, which will be penned by the Organization for the Prohibition of Chemical Weapons (OPCW).

It will also outline measures which fall outside of the OPCW authority, particularly providing security for the organization’s inspectors, who would oversee the process on the ground in Syria. But the resolution would not include any references to Chapter 7 of the UN Charter, which grants the Security Council a right to use military force to restore peace, Lavrov stressed.

This is yet another story that was posted on the Russia Todaywebsite yesterday...and this one is also courtesy of Roy Stephens.

China eyes private funds to tackle bad-debt buildup, avoid bailout

Faced with a chorus of warnings that China risks choking on bad debts, Beijing is pushing banks to raise private capital in an effort to head off the need for a second government bailout in as many decades.

The hangover from a credit binge that powered China's swift recovery from the global financial crisis, combined with the economy's slowdown, has prompted expectations of a repeat of the early 2000s, when Beijing shored up its major banks with hundreds of billions of dollars.

Right now, however, authorities appear focused on pushing banks to bolster their balance sheets by aggressively enforcing new international bank capital requirements, known as Basel III.

Some analysts say warnings of an impending crisis are overdone.

This Reuters piece was posted on their website late Sunday afternoon...and my thanks go out to Brad Robertson for sending it along.

Three King World News Blogs

1. The first interview is with Eric Pomboy...and it's entitled "Here's Why There is a War In Gold Near the Key $1,300 Level". 2. The second commentary is with Egon von Greyerz: "Major Shortage of Physical Gold" Has Fed Greatly Concerned". 3. The last one is with Robert Fitzwilson. It bears the headline "Here Are the Opportunities For Investors to Make a Fortune".

Fake 10-Ounce Silver Bars Reported

Last Friday, Sept. 13, a customer came into our store in Lansing, Michigan, with some genuine silver dollars plus two specimens of what he claimed were struck Engelhard 10-ounce 0.999 fine silver ingots of the variety that had the globe on the front (not the eagle as used in later issues). One was wrapped in plastic, while the other was not.

The employee assisting this customer immediately knew the pieces were counterfeit as they were too large. Genuine struck Engelhard 10-ounce ingots are about 90 millimeters high and 45mm wide. These two pieces were each about 120mm high (4.8 inches) and 60mm wide. Please see the accompanying photographs showing how these measure against a ruler.

The piece with the plastic was put on a scale. Including the plastic, total weight came out to 9.66 troy ounces, far too light to be genuine.

This very short news item was posted on the numismaster.comInternet site yesterday...and my thanks go out to reader Tolling Jennings for sharing it with us.

¤ THE WRAP

That [last] week’s COT gold and silver readings were encouraging has little to do with short term price action directly ahead. If there is more technical fund selling to be created by lower prices, then rest assured that JPMorgan will be looking to set off that selling by rigging prices lower. Only when the technical fund selling is exhausted will JPMorgan stop rigging prices lower. Unfortunately, there is no way of pinpointing that time without the benefit of hindsight, but we are so deep into this current rigging that it feels we are past, or close, to the point of a cessation to JPMorgan’s rig to the downside. I hope I’m not beating this process to death, but (aside from subscribers) so many observers don’t seem to get what drives gold and silver prices. - Silver analyst Ted Butler: 14 September 2013

I wouldn't read a lot into Tuesday's price action in any of the precious metals. Volumes were very light, and anyone with an agenda could move prices in either direction. And as Ted pointed out in his quote above, the down-side process has probably pretty much run its course. Everyone is in a wait-and-see mode for Bernanke & Co. later this afternoon in New York. Then I expect we'll see some price action. The only thing I don't know for sure is which direction it will take, or how fast it will move when it does.

The high-frequency traders did the dirty in all four precious metals early in Far East trading this a.m., with the lows coming at 10 a.m. in Hong Kong on their Wednesday morning. Then, starting just before 2 p.m. local time, rallies began that have extended about an hour into the London trading session. Gold volume is already north of 50,000 contracts, and silver's volume is approaching 14,000 contracts. The dollar index is doing precisely nothing.

And as I hit the send button on today's column at 5:10 a.m. EDT, I note that the tiny rallies I spoke of in the preceding paragraph have amounted to nothing, and all four precious metals are trading slightly below their Tuesday afternoon closes in New York. Volumes have really backed off. Gold volume is at 57,000 contracts, and silver's volume is just under 15,000 contracts, and the dollar index is still trading sideways.

Like you, I await the word from the Fed, and we'll take it from there.

See you here tomorrow.

Catharsis Ours

Wednesday, September 18, 2013