This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

How India Is Shrinking Its 250-Ton Gold Black Market

Stocks in this article: GLDIAUSGOL

Updated from 1:48 p.m. ET with settlement prices

NEW YORK (TheStreet) -- India's national election thrusting the Bharatiya Janata Party into power of the government may spell an end to the nation's growing black market trade.

Some 50 tons of gold a quarter, or as much as 250 tons per year, have traded on India's black market since the country imposed heavy tariffs on the precious metal, the World Gold Council said in an interview, citing market sources.


WATCH: More market update videos on TheStreet TV | More videos from Joe Deaux

India last month voted the BJP to control the lower house of parliament in a decision that could spell weakened tariffs on gold and shrink the precious metal's black market trade, which likely didn't exist before the regulations.

"It's certainly something that is shrouded in a lot of secrecy; however, market sources have indicated somewhere in the region of 50 tons per quarter, or something in the relm of 200 to 250 tons per annum," Will Rhind, managing director of investment at the World Gold Council, said.

Rhind said before the tariffs, "theoretically" a gold black market didn't exist because Indians traded the metal freely. The tariff's unintended consequence was to create a black market, Rhind said.

India's government votes in July on a new budget, in which the right-of-center BJP is likely to propose a change to the tariffs.

Gold prices on Tuesday were trading sideways as investors remained on the sidelines ahead of the European Central Bank's Thursday policy announcement, and Friday's monthly U.S. employment report.

Gold for August delivery at the COMEX division of the New York Mercantile Exchange on Tuesday tacked on 50 cents to settle at $1,244.50 an ounce. The gold price traded as high as $1,247.90 and as low as $1,240.20 an ounce, while the spot price was adding $1, or 0.08%.

"Ahead of the ECB meeting and [nonfarm payrolls] later this week, I really don't see things changing dramatically," David Govett, head of precious metals at Marex Spectron, wrote Tuesday in a note to clients.

An index that measures sentiment in buying and selling physical gold dipped as investors opted to rotate out of the yellow metal into other asset classes.

BullionVault, an investor service to buy and sell gold, said its index dropped to 52.4 in May from the prior month. A reading above 50 indicates there are more buyers than sellers of the asset.

"You're quite right, the gold investor index has become boring," Adrian Ash, head of Research at BullionVault, said in a phone interview from London when discussing the tight range of the index readings since last year. Ash said what may be making the gold index "boring" is the wide gold-to-silver ratio, which may be attracting investors into the white metal for its cheap price relative to gold.

Ash said BullionVault does not record data for a silver index.

Silver prices for July delivery gained 2 cents to close at $18.76 an ounce, while the U.S. dollar index was slipping 0.12% to $80.53.

Watch: Why Is This Gold Company Throwing Money Away?

Watch: How 250 Tons of Gold Goes Missing on the Indian Black Market

-- Written by Joe Deaux in New York.

>Contact by Email.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,805.41 +127.51 0.76%
S&P 500 1,964.58 +13.76 0.71%
NASDAQ 4,483.7150 +30.9230 0.69%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs