Gold which has been considered by investors and traders as the world’s most valuable safe haven asset might be banned for the upcoming period in India.
India is world’s largest gold importer and purchases about 700 tons per year. year. Experts have stated that India demands gold more than any other asset, thereby rendering it the most valued haven asset in the region.
However, reporters claim that the planned ban on importation of gold might be as a result of the rise in the value of gold premiums with a two highs increase in this month.
Chirag Thakkar, the director of Amrapali Group, noted that;
The country was experiencing some jewelry demand as a result of the continuing wedding season and drop in their prices. He added that the cash constraint would be terrible for the future of the gold industry, especially in the rural areas.
Among the explanations present for the existence of the pitch in gold premiums, is the devaluation of Chinese yuan and the possible prohibition on gold imports.
A Mumbai-based private bank dealer stated in a Reuters that the limitation on gold import was highly likely, as the Indian government had previously hinted on the ban after it had eliminated the 500 and 1000 rupee notes.
The rumor prompted a lot of buyers to purchase the gold causing a higher demand for gold jewelry.
The market shock ahead
The Indian government decided to demonetize the 500 and 1000 cash notes in an attempt to reduce money laundering in the financial sector. This was as reported by Cointelegraph. With the law finally in action, the government has switched its attention to the gold industry, as the corrupt money launders are switching their attention to solid assets to save their wealth.
As reported by Nigam Arora a financial specialist and also the founder of Arora Report the importation ban may result in a market shock as was experienced in 1971 due to President Nixon’s decision to do away with the gold measure in 1971.
The Indian Jewellers Association has told members of rumors in certain circles that there could be a limitation on gold imports. Though still a rumor the whole Asian social media is alive with the news.
If the limitation on gold import was to take place, the demand for other safe haven goods would significantly increase with the only available asset with increasing liquidity and a stable global exchange rates being Bitcoin. Bitcoin has seen an increased trade volume after the elimination of 1000 and 500 notes in India. Top
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