Welcome to illuminati silver, we tell you
the truth about silver. Today is Monday 21st November 2016 and we
are commenting on gold premiums surging in India on Friday to a 2 year high.
We reported in our video entitled “WARNING – India scraps 500 and 1,000 Rupee bank notes
overnight” on the 8th November – that the Indian government withdrew higher denomination
notes – the 500 and 1000 rupee notes from circulation and gave its citizens until the
end of December to exchange them for new notes – providing the excuse that its part of
its fight against black money – monies obtained via illegal and black market operations.
This caused no end of problems including curbs on cash withdrawals from banks resulting in
enormous queues and a degree of consumer panic. The next unfolding scene of this saga is that
gold premiums in India jumped to 2 year highs on Friday as jewellers ramped up purchases
on fears that the government might put curbs on gold imports.
Although retail demand has been reported as subdued due to the cash crunch, dealers were
charging a premium of up to $12 an ounce over official prices which also include a 10% import
tax. The premium was the highest since mid-November 2014, and compared with a premium of up to
$6 an ounce last week. Chirag Thakkar, a director with Amrapali Group
said: “We are seeing some jewellery demand due to
the ongoing wedding season and crash in prices. But the cash constraint is going to be really
tough for the gold industry in the near future, especially from rural areas.”
This could prove problematic as two-thirds of gold demand actually comes from the rural
areas where jewellery is regarded as a traditional store of wealth.
Supporting this fear, Mangesh Devi, a jeweller based in Satara, Maharashtra, who caters mainly
to farmers said “Our business has nearly stalled due to the
cash crunch.” Meanwhile, premiums in China rose up to $10
an ounce against the international benchmark from $5 last week.
Zhirui Ji, an analyst with metals consultancy GFMS said;
“the buying could be driven by the panic in reaction to the recent depreciation of the
yuan.” However, premiums elsewhere such as Hong Kong,
Singapore and Japan either remain modest or trade at a marginal discount.
So what can we all make of this situation in India?
Well frankly it’s difficult to tell. If trade has slackened, one would expect a reduction
in prices to attract more, however, if retailers are concerned about future supply we can understand
the raising of premiums. With Prime Minister Narendra Modi warning
on Saturday that there could be more measures against black money after the December-end
deadline to deposit the scrapped currency, one can only guess what such measures will
be. Our sources tell us that he is on a mission. He won’t be thwarted from his task to crack
down on ‘black market’ operations and is determined to increase the tax take on
earned income to acceptable levels as opposed to the derisory ones currently received.
With all of these rumours currently circulating, we are reminded of articles published back
in March 2014 where smuggling of gold into India was on the rise, estimated at around
700 kg per day. This was then mainly caused by the government
hiking the import duty on gold three times, eventually to 15%, to curb demand for the
precious metal and rein in a widening current account deficit that had touched a record
high of $88bn in 2012-13. With premiums rising, cash being squeezed
and potential import controls being muted, we are confident that similar attempts to
smuggle gold in record volumes into India will be enhanced.
If such controls are introduced and is successful, then India, one of the world’s leading gold
importers being unable to import the same levels of gold as previously, will undoubtedly
have an effect on its price. However, this is just rumour for the moment, and we have
to wait and see how events unfold. Currently gold is standing at $1214 and silver
at $16.69 oz marginally up this morning, however we still expect further downward pressure
during the next 2 weeks or so. We hope you have found this video interesting
and informative and if so, please give it a thumb up and share it on twitter. Also kindly
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is updated daily can be found at facebook.com/illuminatisilver Disclaimer: Illuminati Silver owners come from a background
of Banking, International Wealth Management and Economics. Having now retired from these
worlds we are not qualified to give investment advice. Therefore, this and other productions
must not be deemed to be giving such advice and merely represent the personal views of