For the past year, we have opined that India’s government may be the world’s most inept; which, as you well know, are saying A LOT. By kowtowing to Western bankers – and thus, massively overprinting the Rupee – the Reserve Bank of India has created one of the world’s worst inflation problems. Compounding this madness, the Indian government has undertaken an open-ended promise to subsidize two-thirds of the population (800 million people) with rice and wheat at approximately one rupee per kilogram (i.e, a penny per pound), compared to the current market rates of roughly $0.15/lb and $0.11/lb. In other words, the equivalent of naked shorting billions of ounces of silver at, say, $5/ounce.
Worse yet, it moronically decided to restrict gold imports and sales, to a billion-plus gold loving, rupee hating people. Within months of the last, onerous tariff increase – in August – the Indian smuggling market exploded. Physical premiums over the paper “spot price” have surged to record highs of 20%-25%, and it is estimated that as much as 1,200 tonnes may ultimately have been imported into India in 2013, despite these restrictions. Thus, it should be no surprise that the ruling, anti-gold Congress party was soundly swept in last month’s regional elections; setting the stage for the nationalist BJP party to take back the premiership in May’s national elections. If this occurs, which is highly likely, one would anticipate most – if not all – of the gold import restrictions to be abolished, causing a massive increase in demand, well above and beyond what the smuggling market produced.
Consequently, the Congress party – in typical political back-peddling, appears to be loosening up some of the gold import restrictions; although at this point, the details are sketchy. In other words, they realize the “war against gold” has been lost in a matter of four months; and thus, may well fight an intense war for gold with the BJP prior to May’s elections.
Readers, the stars are lining up for an utterly massive rebound of gold and silver prices in the coming years; and frankly, the odds of such an event occurring this year are growing with each passing day. Remember, when gold and silver finally break their “Cartel shackles,” the ramifications on global fiat currency values could be catastrophic. This is why you must act NOW to protect yourself from what’s coming; as once it arrives, it will be too late.
There is a mistake in the article. The actual cost of rice in India is 3 rupees, which is only 4.5 cents a kilogram, and not the high price indicated. Also the market price cannot be $16/lb – it is much cheaper.
Dror,
Thanks for the correction. I actually got the futures contracts terms mixed up. And thus, I sent the below to my editor, who has updated the piece already. Actually, the proportions of the subsidy (buying at less than 5% of market prices) are correct, but the values were off.
Have a great weekend.
a
Can you correct the following sentence in the “Indian Mess…” piece today, from…
Compounding this madness, the Indian government has undertaken an open-ended promise to subsidize two-thirds of the population with rice and wheat at $0.45/lb. and $0.30/lb., respectively, compared to the current market rates of roughly $16/lb. and $6/lb.
…to…
Compounding this madness, the Indian government has undertaken an open-ended promise to subsidize two-thirds of the population (800 million people) with rice and wheat at approximately one rupee per kilogram (i.e, a penny per pound), compared to the current market rates of roughly $0.15/lb and $0.11/lb.
andy good article. i am from india low quality rice in india costs 20rs/kg (33cents/kg) & medium quality $1/kg this is ground reality of inflation.govt is providing absurd subsidies on waater,electricity & now wheat rice etc.with white money very difficult to buy gold but in black mkt easily available @20-25% premium & yes people are buying.
Thanks Nik,
Actually, I corrected the article, per answers given to similar questions by readers. I had the scope of the subsidy right, but got confused by the COMEX futures contract terms. Please keep sending info, much appreciated!
a
Hard red spring wheat (bread wheat) is US $6.30 per bushel (60 lbs)or US $231.50 per tonne. That is on the Chicago board. There has to be a mistake in the article…..sorry (I am Canadian):)
TJ
TJ,
Thanks for the correction. I actually got the futures contracts terms mixed up. And thus, I sent the below to my editor, who has updated the piece already. Actually, the proportions of the subsidy (buying at less than 5% of market prices) are correct, but the values were off.
Have a great weekend.
a
Can you correct the following sentence in the “Indian Mess…” piece today, from…
Compounding this madness, the Indian government has undertaken an open-ended promise to subsidize two-thirds of the population with rice and wheat at $0.45/lb. and $0.30/lb., respectively, compared to the current market rates of roughly $16/lb. and $6/lb.
…to…
Compounding this madness, the Indian government has undertaken an open-ended promise to subsidize two-thirds of the population (800 million people) with rice and wheat at approximately one rupee per kilogram (i.e, a penny per pound), compared to the current market rates of roughly $0.15/lb and $0.11/lb.
Dear Mr Hoffman, I am just guessing that even though India has imported quite a bit of gold in the past 12 months, there is probably quite a bit of pent up demand. I have read that Indian consumers are very price conscious when it comes to gold. You can bet that they are just waiting for the export taxes to drop and then there will be crazy increase in demand for gold. And what about silver? They like that as well. I believe that we have a good chance of silver making a move higher, closing up the Silver/gold ratio. I believe that this spring this will start and we will have a very unusually good summer, for metals prices. Just sayin. G
Yes, now that the restrictions are being “relaxed,” you can bet demand will soar further. See reader “Nik”‘s comment below.