This is very interesting development in India. Something is going on behind the scenes now - it looks like India is not so willing to cooperate and prevent its citizens from accumulating Gold now. Eric Sprott has discussed it in detail in this podcast:
I am putting Charles Nenner on the record here. Can he be right again this time? So far, after hitting $1,130 Gold was cooperating with his Call. Gold space is full of buzz again. Alan Greenspan is talking about Gold with FT, Le Pen in France is demanding Gold audit and its repatriation after Netherlands brought some of its Gold from NY and Swiss are going vote in their referendum this Sunday. Will it all translate into the Gold breakout above $1,225 level next week? Read more."
By Suvashree Choudhury and Meenakshi Sharma
Nov 28 (Reuters) - India has scrapped a rule mandating traders to export 20 percent of all gold imported into the country, in a surprise move that could cut smuggling and raise legal shipments into the world's second-biggest consumer of the metal afterChina.
Along with a record duty of 10 percent, India introduced the so-called 80:20 import rule tying imports to exports of jewellery last year to bring down inbound shipments and narrow the current account deficit that had hit a record.
"It has been decided by the Government of India to withdraw the 20:80 scheme and restrictions placed on import of gold," the Reserve Bank of India (RBI) said on Friday, without giving a reason for the change in the rule.
Only days ago there were talks between officials of the Mumbai-based central bank and the finance ministry in New Delhi to bring back curbs on some trading houses following a surge in imports over the past few months.
Traders said before the decision on Friday that India's gold imports could climb to around 100 tonnes for a third straight month in November as dealers bought heavily on fears of curbs on overseas purchases, especially as the wedding season picks up.
But the government's latest move came as a surprise even to some officials.
A policymaker associated with India's gold import policy said the government instructed the RBI at 1830 local time on Friday to urgently change the rule. A notification was posted on the central bank's website two hours later.
"We were not informed about the reason for scrapping this rule. The restrictions on who all can import who can't are still valid," said the policymaker, declining to be named as he is not authorised to talk to media.
The rule change, however, was a relief to jewellers facing difficulties in sourcing gold during the key festival and wedding season that started in October.
Bachhraj Bamalwa, director of the All India Gems and Jewellery Trade Federation, said the 80:20 rule was not only encouraging smuggling but was also misused by many traders.
From getting human mules to swallow nuggets to hiding gold bars in dead cows, smugglers had raised their activity since the middle of last year after the import curbs.
Following the disbanding of the 80:20 rule, the government may place a monthly or yearly quota for traders, said Sudheesh Nambiath, a senior analyst at consultancy Thomson Reuters GFMS.
"Quota is a more logical and simple way of monitoring and limiting gold imports," Nambiath said. (Additional reporting by Neha Dasgupta and Devidutta Tripathy; Writing by Krishna N. Das; Editing by Sumeet Chatterjee and David Evans) Reuters."