Weak rupee makes gold smuggling, bets attractive

September 15, 2012

New Delhi, September 15: When 26-year-old Abdul Salam from Dubai was arrested at Mumbai airport last month with 156 gold chains concealed in his shoes, he was trying to land an irresistible windfall. Gold prices are rising faster in India than overseas. And this has brought back a profit opportunity, legal, not-quite-legal and illegal.

Gold arbitrage is promising punters as much as 12% annual return on investment. For some, it's almost Haji Mastan time again. But here's a difference - the infamous gold smuggler arbitraged on government ban on gold imports, today's shadier punters rely on the rupee's weakness against the dollar and the impact a weak rupee has on local gold prices.

There has been a 10-fold increase in the number of gold smuggling cases in recent months. Between April and June this year, authorities impounded gold worth 940 crore in some 200 cases of smuggling, up 272% over the same period last year, finance ministry data shows.

Smugglers make money if they can successfully avoid paying duties - 4% customs duty and other taxes, which add 5%-plus to the landed cost of gold.

Arbitraging on gold in less risky ways is possible - but complicated. The incentives, for all kinds of punters, is however simple to understand.

Take this price comparison. On September 10, 2011, the spot London price was $1,857/ounce. The price on MCX in Mumbai was 28,152/10 gms. On September 10, 2012, the spot London price was $1,736. The price on MCX was 32,035. In other words, while gold overseas dropped 6.5% in last one year, gold on MCX has risen almost 14%.

Why? Last September, the dollar was trading at 46.48. Now, the exchange rate is 55.36. It's this near- 20% depreciation of the rupee that has pushed up local gold prices.

The thumb rule is that every one rupee rise or fall in the exchange rate leads to a movement of 500-550 per 10 gm in the same direction on MCX. Since the rupee is expected to further weaken against the dollar as companies scramble to pay back overseas loans in the next couple of months, gold's faster rise in India is virtually guaranteed for the rest of the year.

"Normally international gold prices rise on the back of a weakening dollar. Currently, while the dollar's weakness continues to push up gold, the dollar has strengthened against the rupee. That is why Indian prices are higher than the world market. It is a pure currency play," says analyst Thiagarajan Gnanasekar at CommTrendz Research and Fund Management.

How does a canny investor - assuming he's not keen on smuggling - take advantage of this currency play?

When gold lands legally in India, it attracts taxes that add up to more than 5% (4% customs duty and local taxes). After paying that duty, there's no real possibility of arbitrage. That's why NRIs, allowed to legally import 1 kg gold per head, can't play the local market.

Theoretically, an Indian investor can buy a gold contract on New York Mercantile Exchange's Comex division, hedge the rupee against the dollar, and sell an equivalent contract on the MCX, says Ashok Mittal, CEO, Emkay Commotrade, a brokerage.

This can be a high risk strategy. You have to pay some cash upfront as margin money in both MCX and Comex along with the brokerage fees. There is the cost of hedging the rupee against the dollar.

gold


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August 6,2020

New Delhi Aug 6: In a new twist in the Vijay Mallya case, a certain document connected with the case in the Supreme Court has gone missing from the apex court files. 

A bench comprising Justices U.U. Lalit and Ashok Bhushan adjourned the hearing to August 20.

It was hearing the review plea filed by Mallya against a July 14, 2017 judgment wherein he was found guilty of contempt for not paying Rs 9,000 crore dues to banks despite repeated directions, although he had transferred $40 million to his children.

The bench was looking for a reply on an intervention application, which it seemed has gone missing from the case papers.Parties involved in the case sought more time to file fresh copies.

On June 19, the Supreme Court sought explanation from its registry regarding Mallya's appeal against the May 2017 conviction in the contempt case for not repaying Rs 9,000 crore dues to banks not listed for the last 3 years.

A bench comprising Justices Lalit and Bhushan had asked the Registry to furnish all the details including names of the officials who had dealt with the file concerning the Review Petition for last three years.

The bench said according to the record, placed before it, the review petition was not listed before the court for last three years. "Before we deal with the submissions raised in the Review Petition, we direct the Registry to explain why the Review Petition was not listed before the concerned Court for last three years," said the bench.In May 2017, the apex court held him guilty of contempt of court for transferring $40 million to his children, and ordered him to appear on July 10 to argue on the quantum of punishment.

The bench said let the explanation be furnished within two weeks. "The Review Petition shall, thereafter, be considered on merits," it added.In 2017, the apex court passed the order on a contempt petition against Mallya by a consortium of banks led by the SBI. 

The banks claimed Mallya transferred $40 million from Daigeo to his children's accounts, and did not use this money to clear his debt. Banks cited this as violation of judicial orders.

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February 26,2020

Mumbai, Feb 26: Observing that the violence in Delhi is akin to a "horror film" depicting the grim reality of the 1984 anti-Sikh riots, the Shiv Sena on Wednesday said the "bloodbath" has brought disrepute to the national capital like never before while US President Donald Trump was in India with the "message of love".

The editorial in party mouthpiece 'Saamana' lamented that Trump was welcomed in Delhi while there was bloodbath on the streets.

It further said that the violence could potentially spread the message that the Central government has failed to maintain the law and order situation in Delhi.

"Violence has erupted in Delhi. People are on the streets equipped with canes, swords, revolvers, blood is being spilled on the roads. Some horror film-like situation is being witnessed in Delhi, which depicts the grim reality of the 1984 riots," the Sena said.

It further said the BJP was still blaming the Congress for the deaths of hundreds of Sikhs in the violence that was erupted after assassination of then Prime Minister Indira Gandhi.

It needs to be unravelled who is responsible for the current riots in Delhi, the Sena said while referring to the "language of threats and warning used by some BJP leaders".

"The national capital was burning at a time when Prime Minister Narendra Modi and visiting US President Trump were holding talks.

"It does not augur well that Trump was welcomed in Delhi with the horror film of violence, bloodbath on the streets, screams of people, and tear gases. Trump saheb came to Delhi with a message of love, but what unfolded before him? 'Namaste' in Ahmedabad and violence in Delhi. Never before Delhi was defamed like this," the editorial said.

Trump had begun his February 24-25 India visit from Ahmedabad in Gujarat.

Seventeen people have died so far and over hundred were injured in the violence that has gripped several parts of north east Delhi over the Citizenship Amendment Act (CAA) since Sunday.

Attacking the Central government over reports that the violence was timed with Trump's visit, Sena said, "the Union Home Ministry has alleged that a conspiracy was hatched to defame India internationally by triggering the violence during Trump's visit to the national capital.

"The Home Ministry not knowing about the conspiracy behind the violence over the CAA is detrimental to national security. There is no problem in controlling the riots with the same courage with which Article 370 and 35A were scrapped," the editorial said.

It further said the anti-CAA protest at Shaheen Bagh in Delhi was yet to be called off yet despite the Supreme Court appointing mediators.

"It is being said that the violence sparked off after some BJP leaders talked the language of threats and warning. So, did someone want the peaceful agitation (at Shaheen Bagh) to acquire the present form of riots? (They) could have waited for at least Trump to leave the country," the Sena said.

The Uddhav Thackeray-led party also questioned the timing of the riots, which are occurring days after the results of the Delhi assembly polls.

"It is mysterious that the violence broke out days after the BJP lost the Delhi assembly elections. The BJP lost and now this is the condition of Delhi," the Sena said.

The Uddhav Thackeray-led party, a former ally of the BJP, now shares power in Maharashtra with the NCP and the Congress.

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May 15,2020

New Delhi, May 15: Microsoft founder Bill Gates on Friday thanked Prime Minister Narendra Modi for the interaction and stressed that combating the coronavirus pandemic requires global collaboration.

"Thank you for the conversation and partnership PM Narendra Modi. Combating the pandemic requires global collaboration. India's role is key as the world works to minimize social and economic impact, and pave the way to vaccine, testing, and treatment access for all," Bill Gates said.

Prime Minister Narendra Modi on Thursday interacted with philanthropist and Microsoft co-founder Bill Gates and discussed the global response to Covid-19 and the importance of global coordination on scientific innovation to combat the pandemic.

The Prime Minister underlined the conscious approach that India has adopted in its fight against the health crisis - an approach based on ensuring public engagement through appropriate messaging, a PMO release said.

He explained how this people-centric bottom-up approach has helped win acceptability for physical distancing, respect for frontline workers, wearing of masks, maintaining proper hygiene, and respecting lockdown provisions.

They agreed that given India's willingness and capacity to contribute to global efforts, particularly for benefit of fellow developing countries, it was important for India to be included in the ongoing global discussions for coordinating responses to the pandemic.

The Prime Minister also suggested that the Gates Foundation could take the lead in analyzing the necessary changes in lifestyles, economic organisation, social behaviour, modes of disseminating education and healthcare, that would emerge in the post-Covid world, and the associated technological challenges that would need to be addressed.

He said that India would be happy to contribute to such an analytical exercise based on its own experiences.

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