India Gold Shortage: Hoax or a Pending Nightmare?

The campaign measures are laudable if they are being executed in the right spirit. But gold physical prices at lows due to the recent price declines, the sellers of bullion and coins may have been experiencing relative losses in sales, one may get sceptical. This factor may also be forcing them to initiate a campaign advocating crunch on sales.

In India H2, 2013 is marked by festivities like Diwali and Dhanteras, two Hindu festivals which would see enhanced gold buying.

But this time around the jewellers in India are campaigning hard to restrict the sales of gold?bullion and coins-- for the next 3-4 months! Rising Current Account Deficit and the subsequent gold import curbs initiated by India government looks to have created a fear of potential shortage in gold bullion. Hence the campaigning!

"This is just a temporary measure, but if we don't follow through with this, there may be a situation when jewellers don't have any gold to sell. The government and the Reserve Bank of India have already restricted gold imports," said Vikas Chudasama, director general, All India Gems and Jewellery Trade Federation to the Indian Express.

"This is a request from the federation to all our member jewellers as it will help bring down imports over the next few months and so ease pressure on the current account deficit (CAD)," he noted.

India recently hiked the import duty on gold to 8% and RBI too put in restrictions on import funding by banks. Indian Rupee has dipped substantially and to record lows even as widening CAD is giving sleepless nights to policy makers.