The lawsuits against banks that alleges they engaged in a secret scheme to manipulate the price of silver bullion is proceeding.
Gold fixing in London at NM Rothschild and Sons began in September 1919
Manipulation of the silver market was covered in a recently released ‘Get REAL’ Special on Silver presented by Jan Skoyles. Mark O’Byrne of Goldcore.com was interviewed and the interview was an in depth look at this silver market today. Read more ›
About 50 tonne gold has been smuggled into the country in the past 10 days, and subsequently pushed into the market to cater to a surge in demand for the precious metal in the festive season. There is a heavy demand for gold during Dussehra, for which booking and supply will start from Thursday, when shradh ends and Navratri starts.
Market sources said that 30% of the smuggled gold has been supplied in Mumbai to unscrupulous jewellers, while the rest was distributed to different parts of the country.
Sources said that illegal gold is finding a place in the market because of below average import resulting from the 80:20 scheme and 10% import duty. Against the average monthly demand of 80 tonne, the import is presently around 51 tonne in the country.
Sources said that gold was smuggled into the country through the land route, via Nepal, Bhutan, Bangladesh and Pakistan. “This is because airports have tightened security, restricting the smuggling of gold by the air route,” said a market expert. The Mumbai airport customs, which has started a serious crackdown on gold smugglers, has seized around 529 kg gold from April to August this financial year.
An article caught my eye this week. The Tirumala Tirupati Temple in India has deposited gold at the State Bank of India, and is getting paid interest on their deposit. There is something unique about this. The interest is paid in gold.
To understand why no one else is paying interest in gold, let’s first look at how one can use any asset class to make a dollar income: speculation. Buy something. Wait. Sell it at a higher price. You can use bonds, stocks, real estate, artwork, or classic Ferraris. By the way, no matter what you use, you are converting what had been someone else’s capital into your own income. This is capital destruction on a massive scale.
Using gold to produce a dollar income is simple. Just sell a covered call with a strike price a little higher than the current market price. You get paid a premium immediately. If the gold price does not rise, then you can repeat the trick and sell another call. If it does rise, you must sell the gold at the strike price. This earns you a profit, as it is above what you paid. Then just buy more gold and do it again.
If you keep your books in dollars, and trade for dollar gains, you don’t really care how much gold you have. You only care about how many dollars. If the gold price doubles, you may end up with about half the gold. But who cares, at least you’re making a steady stream of dollars that you can consume.
Making a gold income is something else.
You can’t just sell calls, or sell the gold itself. If you do, and the gold price rises, you will have to buy the gold back. However, the same dollars you have will get you less gold at the higher price. For example, you start with 100oz gold. Today the price is about $1,300 per ounce, and you sell a December call option. It has a strike price of $1,325 and you get paid immediately $25 per ounce or $2,500 for the contract.>> Read More
Air India’s employees have been in the news in the past as well for this kind of misdemeanour. The enforcement agency has reported similar cases of gold smuggling in the past few years as well. As much as 13 Air India Employee cases have been reported in the last 3 years.
The grey channel for smuggling gold in to the country is thriving with no bounds. As much that some of the employees on the national carrier have also been roped in to get gold in to the country without paying proper dues. There are high duties on gold imports in India (10%), which has led to this kind of activity.
World Gold Council projected that last year 200-250 tonnes of gold was brought into India through unlawful networks. Junior Civil Aviation Minister Siddeshwara, did seek strict disciplinary actions against AI employees who take this channel to get gold in to the country.
China’s gold demand fell by nearly a fifth in the first half of 2014 from a year ago as consumer interest in bullion bars and coins waned.
Soaring purchases by retail customers in 2013 helped China overtake India as the world largest gold consumer for the first time. That buying “frenzy”, as the metals consultancy Thomson Reuters GFMS described it, was largely driven by the 28 per cent fall in the gold price last year.
Prices have since firmed, with gold up 8 per cent for the year to date, thanks in part to the increased geopolitical risks, from Russia to the Middle East. The yellow metal fell 1 per cent on Thursday to trade as low as $1,292 a troy ounce.
Figures from the China Gold Association (CGA) showed that demand from January to June totalled 569 tonnes, a 19 per cent dip from the 706 tonnes consumed during the same period in 2013. >> Read More
India’s central bank said on Wednesday it has sought quotes from banks to swap gold in its own vaults for international-standard gold, aiming to improve the management of its reserves.
The Reserve Bank of India said the operation would “standardise the gold available with RBI in India with respect to international standards” and the gold acquired would be delivered to its overseas custodian, the Bank of England.
By holding gold reserves in London, the RBI would gain flexibility to mobilise them if needed to defend the currency. It shipped some of its gold holdings to Britain in 1991 as part of a series of emergency measures to tackle a financial crisis.
This begs the question of who really needs the gold, the RBI, or London bankers?>> Read More