India Enforces New Laws To Curb Gold Demand, But Demand Rises Further

In its efforts to curb rising gold demand, The RBI (Reserve Bank of India) has barred banks and NBFC’s - non-banking finance companies - to extend loans against units of Gold ETFs (exchange traded funds) and gold mutual funds. The RBI had earlier this month advised banks to ensure the weight of any specially minted gold coin did not exceed 50g per customer.

The Reserve Bank of India had also suggested that the amount of loan to any customer against gold ornaments, gold jewelry or coins weighing up to 50g, should be within the Board-approved limit. TheRBI has now clarified that the restriction also applied against units of gold ETFs or gold mutual funds, and that no advances be given by NBFCs against primary gold and gold coins. The Reserve Bank of India has also said NBFCs should not grant advances for purchase of gold in any form, including primary gold, gold bullion, gold jewelry, gold coins, units of Gold ETFs and units of gold mutual funds. By the end of Q1 2013, Gold ETFs had assets worth Rs 11,648 crore as assets under management as per the Association of Mutual Funds in India.

India Gold rush among people causes coins to vanish from Osmania:

With the drop in gold prices, jewelry stores in India are reporting a heavy demand for gold coins at Hyderabad. In fact, many say that Gold coin denominations of 2, 5 and 10 grams have fast dwindled ever since prices of gold came down globally. Gold rate fell to Rs 26,000 per 10 gram for 24 carat gold in India, which caused a huge crisis and people made a beeline for stores to invest in gold. Prices of gold are expected to slide further and result in more people opting for it, said a trade insider.

The huge demand in India has triggered such a mad rush for gold coins that jewellers in Abids’ said they were asking customers to come back later. ”First I wanted 10 gram coins, but since it was not available I opted for the 5 gram ones, which again I was told has fast dwindled,” said a woman in Abids. The city is also going to witness one of the biggest jewellery fairs in June, which will see more than 125 top jewelers put up stalls in the city. Three big jewelers from the city in India are participating in the fair, where people are likely to throng in large numbers. ”I am looking forward to the fair and hoping that prices still remain down. It is a good time to invest in gold,” said Atul Wasnik from Khairatabad.

Floor trading, which was closed for Monday’s U.S. Memorial Day holiday, will resume Tuesday. Gold prices swung between losses and gains Tuesday, slightly feeling the pinch from strength in the U.S. dollar following the market’s best weekly gain in a month. Gold futures have fallen nearly 6% this month till now. As of May 21, money managers cut their net-long position by 9% to 35,686 futures and options, the least since July 2007, according to data compiled by the U.S. Commodity Futures Trading Commission. Holdings of short contracts climbed 6.7% to a record 79,416.