Controls on gold inflows don’t fix the causes of capital outflows.
What’s going on in India is nothing new. We’ve seen it over and over again throughout struggling economies.
These attempts to control movement of currency are very common when a government is faced with problems like India’s. They actually create a more crippling environment than the one they are put in place to improve.
Gold has always been and will always be the safe haven of choice when people lack confidence in their government. Lacking confidence doesn’t only mean that they’re not certain they’ll perform well, but it also may mean that they don’t trust their government to operate in their best interest. Starting with allowing economic freedom, and defending the value of the currency.
What are these currency controls recently put on gold in India?
They’ve prohibited and restricted loans to customers of gold bullion;They’ve raised the import tax on both gold and silver to 10%;The sale of gold may only be made to jewelers or bullion dealers to supply the jewelry industry;Gold importers must ensure that 20% of all gold imported is to be exported as product.
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