Cory's Insights – Mon 7 Jul, 2014

Gold swaps to cut imports, ease payment pressure

This is an interesting development out of India. While the details are still scarce the initial fact appears to be that India is exchanging some of its older gold – which is of a lower purity – for more pure gold that could be held outside its boarders to be sold or collateralize. We will have to see how this story develops.

Click here to read the full article.


Comments:
  1. On July 7, 2014 at 8:55 am,
    irishtony says:

    SOMEBODY SOMEWHERE IS TWISTING ARMS SOMEWHERE IN INDIA……………………
    This idea of swapping low purity gold for high purity gold , & then storing it in London….”STINKS”….Why not just have it re, refined at home & store it in India ?

    • On July 7, 2014 at 8:58 am,
      irishtony says:

      BTW…This will not go down well with the people of India…not after the promises the new GOVT gave to get elected….IMO.

      • On July 7, 2014 at 9:40 am,
        Cory says:

        Good comments Irish. This story caught me off guard. I did not think India would make this kind of move and ship/store some of its gold offshore. We still do not have all the details but we will be bringing Jayant Bhandari on the show tomorrow to shed some more light on the story.

      • On July 7, 2014 at 2:01 pm,
        ManAboutDallas says:

        You underestimate and misunderstand Mr. Modi.

    • On July 7, 2014 at 7:02 pm,
      Bron Suchecki says:

      Because refining it will make no difference to the local gold price and their CAD. The swap has no net effect on India’s gold reserves but consider the two legs:

      1. Sell gold in India
      2. Buy gold in UK

      Step 1 results in supply of physical in India, helping to reduce their premium to global gold prices and reduces need to import gold, thereby reducing their CAD.

      It exactly meets the needs of the local gold industry, which has a shortage issue due to 80:20 rule and import duty. It is a one off, a temporary fix as the RBI only has so much gold, maybe meant to keep the industry happy until budget announcements, or alternatively, maybe the budget will not change the 80:20 rule (which is more of a problem than the import duty as far as the industry is concerned) and this is a pre-emptive move to placate what they know will be the response if they don’t change the 80:20 rule.

  2. On July 7, 2014 at 9:00 am,
    CFS says:
    • On July 7, 2014 at 9:46 am,
      Cory says:

      Good story Professor. I am going to post this story as I think it is a nice outline of some of the moves other countries are making with their gold.

    • On July 7, 2014 at 7:04 pm,
      Bron Suchecki says:

      I would just note here that the Indian swap does not help the bankers, as the second leg of the swap pulls physical out of the London market. Only if the RBI subsequently leases their newly acquired London gold will this take pressure off the London market, but there is no indication that the RBI is planning to do that at this stage.

      • On July 7, 2014 at 8:24 pm,
        Skeeta says:

        Yes Bron,
        But the conspiracy theory nut jobs don’t want to hear any form of intelligent reasoning.
        They are too busy outside staring at the moon…wondering how long its going to take until the gold price is up there on it !

        • On July 8, 2014 at 2:41 am,
          Skeeta says:

          Currently have my two young puppies out the backyard for a p!ss break before bedtime.
          They are both looking up & barking at the moon.
          LOL…They both must both be hardcore gold bugs !!!

          I’m going to have to make them both little tin foil hats & take a photo. 🙂

  3. On July 7, 2014 at 1:21 pm,
    ManAboutDallas says:

    I think ‘ole Modi is laying a trap here. RBI wouldn’t be doing this without his knowledge, approval, and consent. As Shakespeare wrote it in “Hamlet”….. “… if this be madness, yet there be a method to it.”

    • On July 7, 2014 at 1:24 pm,
      Big Al says:

      Great quote Dallas!

      Ever been to the Shakespearean Theater in Ashland Oregon? Rated number three in the world behind Stratford and Toronto. Great venue and it goes from early Spring until late Fall. Trust me, it is well worth the trip!

      • On July 7, 2014 at 1:33 pm,
        ManAboutDallas says:

        With that endorsement, Al, I’ll certainly give it my consideration as a destination venue. I do need to get out of my hermit’s cave more often.