GoI initiative to eradicate Black
Money, Corruption Terror funding through discontinuation of 500 & 1000
currency bill impacted the Gold industry the most. The lust of Indian citizens
towards Gold and favorite holding product by the Black Money hoarders forced
untracked sector to import around 1000 tonnes of Gold in 2015 followed by $35 bn
outflow of foreign currency.
GoI also reignited the holding
limit of Gold where married ladies, unmarried girl & Male can hold 500 gm,
250 gm &100 gm. I call the initiative Gold rationing and if we assume a
family of 4 with two daughters then Gold holding per family will limit at 1.1kg
per family.
So called rationing on Gold as
well as recent raids on jewelers by different government agencies sent shock
waves across Gold ecosystem.
India and China are top two
importers of Gold and huge demand from both the countries keep Global Gold
price stable as supply of Gold gets absorbed easily. The sudden fall in import
by India will lead to oversupply of Gold in International market. The slower
financial state of Middle east, Russia and Europe won't help to absorb inventory
which will be generated by low import by India. The recent indication by US
fed regarding rate hike during Dec 2016
review will add move trouble for Gold
The above will create panic
selling in International Gold Exchanges and will speculate 10 to 15% correction
in next six month.
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