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Nadler, Gero React To Possible Indian Gold Ban

(Kitco News) - Although unconfirmed, recent market chatter has some experts taking the threat that the Indian government could ban gold imports into the country seriously.

George Gero, managing director at RBC Wealth Management, told Kitco News in an email that New York traders only know what is being reported in the news with many believing “where there is smoke there is fire.”

Known market watcher Jon Nadler, said that he wouldn't be surprised if there was some truth behind the news.

"I think that the Indian government battle against clandestine money dealings is coming to a head. One of the most hitherto convenient ways of carrying out illicit value exchanges in that country has been through the use of smuggled gold and hidden gold bullion in general," he said. "However, it appears that Indian gold bullion imports have already slumped by 60% or more in the current year. Thus, the possibility of a total embargo on gold imports for the remainder of the 2017 fiscal year, while significant, might not be felt too strongly internally. "

Rumors of an Indian gold ban have been circulated since early November, after Prime Minister Narendra Modi’s move to ban 500 and 1,000 rupee notes, to crack down on “black” money, which supports the country’s massive underground economy.

Simona, Gambarini, commodities economist at Capital Economics, said in an interview with Kitco News, said that it doesn’t seem realistic that the Indian government would issue a long-term ban on gold, but added that they could place a temporary ban on the metal or even raise import taxes again.

“Even a short-term ban on gold would be a drastic feat for the government but it is something that we can’t completely rule out,” she said.

Gambarini said that one of the reasons why the market can’t completely rule out a crackdown on India’s gold market, is because of the government’s commitment to stop the spread of “black” money, large denominations used to support the country’s massive underground economy.

“The appeal of gold in India is that it is highly unregulated,” she said. “But that is slowly starting to change as the government is increasing its scrutiny of the sector.

As to when the market could eventually see changes to India’s gold market, Gambarini said that March would be the most logical deadline as this is when the government will release its new budget for the 2018 fiscal year.

Gambarini, said that until then, markets could see massive inflows into India as jewelers increase their stockpiles. She noted that premiums in India are already at their highest level in two years, which is an indication that at least the country’s domestic market is taking these rumors seriously.

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By Neils Christensen of Kitco News;



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