A Stampede For
Gold In India A new front has opened up in the war on cash…and it could have explosive results for gold demand. Dear John, India is in turmoil.
And while it may seem a world away, this development is going to have huge implications for you as a gold investor. As you may have read, on November 8th the Indian government suddenly announced it was banning the Rs 500 and Rs1,000 banknotes, which respectively were worth around $7.50 and $15.00.
They’re worth a lot less today.
That’s because all the old notes have to be exchanged for new notes by December 30.
In the meantime, all the old notes — representing about 88% of the nation’s currency in circulation — can be accepted only at certain banks and outlets to be exchanged.
And the new notes aren’t even printed yet.
The result is that black market currency traders are now paying only Rs 700 for every Rs 1,000 of old currency. That’s a 30% discount for the person turning in their old banknote…or a 43% profit for the currency trader.
As you can imagine, absolute turmoil has erupted in India.
Hordes of people are waiting in line at banks for the limited amount of legal currency available. And when these supplies run out, those waiting all day in line are simply out of luck. Prices of many basic goods have soared; others have crashed due to lack of buyers who have the necessary money to spend.
And the financial press is afire with predictions that Indian gold demand will crash…and that the government may in fact impose a gold import ban. None of this is likely, according to an on-the-spot report by our friend Jayant Bhandari, a highly respected junior gold stock analyst and noted libertarian. Listen To Our Just-Released Podcast
On The Situation In India We just wrapped up our latest edition of the Gold Newsletter Podcast, and in this episode we talked with Bhandari to get his first-hand report from India.
What’s going on is truly amazing.
As I shared with Jayant, this is like a laboratory experiment that proves the value of gold. If you’ve ever wondered what the effects of monetary chaos would be on gold, you’ll find your answer here.
For example, the price of gold in India immediately shot up to nearly $2,294/ounce. That’s right gold in India trades at nearly $2,300 right now.
That’s because gold — as it always has — is the monetary standard that governments can’t devalue. And when the value of the government’s fiat currency comes into question, people will rush for the safety of the yellow metal. Now, the mainstream financial press is predicting that gold demand will crater in India. Of course, precisely the opposite is true. Right now, in the immediate aftermath of this stunning currency recall, the physical volume of gold demand in India may fall somewhat. But this is purely because the price has soared and it’s difficult to buy for citizens trying to trade in the old currency.
Over the longer term, this surprise move to recall 88% of the nation’s paper currency will devastate confidence in paper money and the government itself. Thus, it will encourage Indian citizens to buy more gold to safeguard their wealth.
But will the government institute a gold import ban to prevent citizens from buying more gold?
Jayant assures us this won’t happen, because the gold tariffs and import restrictions already in place serve a very useful function: They allow the authorities to demand even greater bribes to allow gold to pass through.
A total ban would endanger this lucrative source of income for the authorities. (It’s easier to conceal a bribe than it is to hide both a bribe and physical gold.) We covered lots more in the podcast, but the bottom line is that this situation will be enormously bullish for gold over the long run. So click on the link below to get your first-hand look at the big issue that everyone in the gold market’s talking about. All the best,
Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference CLICK HERE To Listen To The
Gold Newsletter Podcast
With Jayant Bhandari | 