Late last year, Indian Prime Minister Modi surprised everyone by swiftly demonetizing the country’s 500- and 1,000-rupee notes, the two largest banknote denominations. This amounted to a staggering 85% of the country’s circulating cash. On top of that, it exacerbated the issue of pent-up gold demand due to the temporary shortage of currency.
The purported reason for the sudden decision, which caused great hardship on many of India’s rural communities, was to help combat the country’s vast black market for stolen or illicit goods. Most of these transactions occur in cash to avoid being traced. However, many believed that the prime minister had other motives—including creating yet another impediment to Indian citizens buying gold.
Now that we are approaching the one-year anniversary of the so-called “Modi Shock,” some interesting data about the aftermath has been compiled by the country’s Central Industrial Security Force. It is now being reported by New Delhi’s NDTV.
According to the CISF, an astounding amount of precious metals have been seized while entering the country in the year since. In addition to 870 million rupees (over $13.4 million) in “suspicious” cash, India’s major airports stopped 1,491.5 kilograms of gold and 572.6 kilos of silver from being smuggled across its borders over the last 12 months. That’s over two metric tons of precious metals!
India has long been plagued by the problem of gold smuggling, particularly in the last decade. Yet the data from the CISF show that the demonetization combined with the country’s “Gold Monetization Schemes” (GMS) and a recent hike in the general services tax have increased the incentives for smuggling gold and silver into India.
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