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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News Network
July 21,2020

Lucknow, Jul 21: Madhya Pradesh Governor Lalji Tandon, a veteran political figure in Uttar Pradesh where he had served as a cabinet minister, died at a hospital here early Tuesday.

The 85-year-old was admitted to the hospital on June 11 with breathing problems, fever and difficulty in urination.

He died at 5:35 am in Medanata Hospital, according to his son Ashutosh Tandon, a UP cabinet minister.

Lalji Tandon is survived by wife and three sons.

His body will be kept at his official residence in Hazratganj and later at his Sindhi Tola residence in Chowk to enable people to pay their last respects.

The last journey will start at 4 in the evening for the Gulala Ghat where his last rites will be performed later in the day, Ashutosh Tandon said in a statement.

The UP government has announced three days mourning as a mark of respect to Lalji Tandon, a former cabinet minister, a government spokesman said.

Belonging to the Atal Bihari Vajpayee and L K Advani era of BJP leaders, Lalji Tandon proved himself as an able administrator during his decades-long political career in Uttar Pradesh.

A former Lok Sabha MP, he was later given gubernatorial responsibility.

He took oath as Madhya Pradesh governor on July 29, 2019, when the Congress was in power in the state, after serving in the same post in Bihar for nearly 11 months. 

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News Network
January 12,2020

Kolkata, Jan 12: Strongly defending the new citizenship law, Prime Minister Narendra Modi said on Sunday the dispute that has arisen over it has made the world aware of persecution of religious minorities in Pakistan.

He, however, deplored that a section of the youth is being “misguided” over the Citizenship (Amendment) Act, which is aimed at giving and not taking away anybody's citizenship rights.

“CAA is not about taking away citizenship, it is about giving citizenship. Today, on National Youth Day, I would like to tell this to the youngsters of India, West Bengal, North East that this is not an overnight law for giving citizenship.

“We must all know that any person of any religion from any country of the world who believes in India and its Constitution can apply for Indian citizenship through due process. There's no problem in that,” he told a gathering at Belur Math, the headquarters of Ramkrishna Mission.

Modi said even Mahatma Gandhi had favoured Indian citizenship to those fleeing religious persecution and that his government has only delivered on the wishes of the freedom fighters.

Referring to anti-CAA protests in the North-East, Modi vowed to protect the distinct identity and culture of the people of the region, and asserted the new law will not hurt their interests.

“We've only done what Mahatma Gandhi had said decades ago. Should we send these refugees back to die? Are they our responsibility or not? Should we make them our citizens or not?” he said, evoking a thunderous applause by the gathering.

Modi said some people with political interests are deliberately spreading rumours about the new citizenship law, despite “complete clarity” over the CAA.

“Our initiative to amend the citizenship act has created a dispute. It is the result of our initiative that Pakistan will now have to answer why they have been persecuting minorities for the last 70 years. Human rights have been demolished in Pakistan,” he said.

Seeking to assuage the concerns of the people of the North-East, Modi called the region “our pride”. “Their culture, traditions and demography remains untouched by this amended law,” he said.

He said the citizenship law was only “changed a little” for those who were ill-treated in Pakisan after Partition.

“They were having a bitter time living there. Women were in danger of losing their pride,” he said.

“Young people have understood the whole thing but those who want to indulge in politics over it will not,” he said.

Modi said five years ago, there was disappointment among the youth of the country, but the situation has changed now.

“Not just India, the entire world has a lot of expectations from the youth of the country. The youth are not afraid of challenges....they challenge the challenges,” he said at the Belur Math, the abode of Swami Vivekananda for several years until his death in 1902, aged 39 years.

Modi, an ardent devotee of Vivekananda, spent the night at the Math.

He has a long association with the Ramkrishna Mission order founded by Vivekananda in 1897. Inspired by the teachings of Vivekananda, Modi had arrived at the Mission Ashram in Gujarat's Rajkot and expressed desire to join the order.

Swami Atmasthananda, who later went on to become the 15th president of the Ramakrishna Math and the Ramakrishna Mission, then headed the Rajkot branch and had advised him that sanyas was not for him and that he should work among people.

During those days, Modi used to regularly meet Atmasthananda and sought his spiritual guidance.

Although Modi went back after spending some time there his the relationship with Swami Atmasthananda and the Ramkrishna Mission continued.

Whenever Modi used to visit Kolkata, even during his days as Gujarat chief minister, he would travel to the Math.

In 2013, during his Kolkata visit, he had gone to Belur and sought the blessings from Atmasthananda.

He had in 2015 called on ailing Swami Atmasthananda at Ramakrishna Mission Seva Pratisthan, a hospital run by the Mission in south Kolkata and enquired about his health.

After Atmasthananda's death in 2017, Prime Minister Modi had termed it as a “personal loss”.

On Sunday, the prime minister paid tributes to Swami Vivekananda on his birth anniversary, which is celebrated as the National Youth Day, and spent some time in the spiritual leader's room in quietude.

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News Network
May 28,2020

New Delhi, May 28: The Crime Branch of the Delhi Police will file 12 chargesheets against 536 Tablighi Jamaat members from three countries, officials said on Thursday.

Till now, the police has already filed chargesheets against 374 foreigners from 32 countries.

The officials said the charges against the Tablighi Jamaat members pertain to violation of visa rules, government guidelines regarding the Epidemic Disease Act and acting negligently in a way that was likely to spread infection of disease dangerous to life.

The Tablighi Jamaat, a religious organisation in Nizamuddin in South Delhi, had allegedly organised a congregation in March in violation of mass gatherings.

The Tablighi Jamaat’s Nizamuddin Markaz (centre) had become a coroavirus hotspot in the national capital.

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