The April raid on gold and gold ETFs almost backfired by creating a tsunami of buying in India and increased demand to unsustainable levels. In May 2013 alone, Indians imported 162 tonnes of gold in a market where monthly global mine production is about 182 tonnes. A continuation of this trend, coupled with strong buying from other Emerging Markets and their Central Banks, would have been overwhelming. But, the response was swift. We suspect that, at the behest of Western Central Banks, the Reserve Bank of India reacted by enacting, in incremental steps, restrictive measures to prevent gold imports (See Figure 4 for a timeline of the major changes made by the Indian Government).3
Figure 3: Traded Value - Ratio of SLV to GLD
Source: Bloomberg. Traded Value is calculated by taking the total trading volume for a quarter and multiplying it by the average price over that quarter. A ratio of 1 indicates that SLV traded as much, in $ terms, as GLD.
Figure 4: Efforts to Curb Indian Gold Imports
- Source, Eric Sprott via Markets at a Glance:
