Written by Bryan Lutz, Editor at Dollarcollapse.com:
When a government tells its citizens to stop buying gold, it’s a tell. And the tell is saying,”Buy more gold.”
There is something especially unique about that signal because it’s not exactly the market telling you to buy gold. The politicians are…
They want to protect the power structure. They want to protect the government, and the taxation they rely on to fund it. So, governments only intervene against gold when gold is winning. And this weekend, Narendra Modi told 1.4 billion Indians to put down the jewelry box.
Bloomberg reports:
Modi Asks Indians to Stop Buying Gold, Hitting Jewelry Stocks
Prime Minister Narendra Modi has called on Indians to avoid buying gold for at least a year to preserve foreign-exchange reserves, a surprising appeal in a country where the metal plays a vital role in savings, weddings and religious festivals. “For a year, be it any function, we shouldn’t buy gold jewelry,” Modi said on Sunday, as he also asked citizens to cut fuel use and unnecessary overseas travel.
India’s biggest jewellery stocks fell on Monday.
Titan dropped 6.6%. Senco Gold fell almost 11%, and Kalyan Jewellers, 9.5%.
Modi also asked Indians to drive less, fly less, and work from home where possible…
That is the start of rationing language controlled by the government.
The State vs. Its Citizens’ Gold
You’ve have seen this before. Governments versus its citizens’ monetary metal is one of the oldest stories in monetary history.
1933, Franklin Roosevelt. Executive Order 6102 ordered Americans to hand in their gold at $20.67 an ounce. Within a year the government revalued it to $35. Anyone who obeyed lost a third of their purchasing power on the spot.
1968, the London Gold Pool. Eight Western central banks tried to suppress the gold price at $35. The pool collapsed within months. Gold went on to reach $800 within twelve years.
1980, the Hunt Brothers. The CFTC and COMEX changed the silver margin rules mid-rally to break the Hunt corner. The State does not let its own citizens corner monetary metal. Not in the open, anyway.
2013, India. Modi’s predecessor jacked the import duty on gold from 4% to 10% to slow buying. As a result, Indians smuggled gold and silver. Then sold it under the table. Imports kept climbing.
Every single time a government has fought gold, the citizens were right and the government was wrong…
Here is the chart that explains why Modi is panicking:
The gold line is the rupee. Higher means weaker. In order to protect the rupee, Modi wants citizens to hold more of a currency that’s rapidly being devalued by the US dollar. Now, the rupee is at a record now, while gold is at a record high.
The Rupee Math
India imports 85% of its crude oil. After the Hormuz disruption, crude went from roughly $70 a barrel to nearly $126 in a matter of weeks.
Gold is India’s second-largest import after oil.
Both are paid for in dollars India does not have enough of…
Except that the current account deficit is widening, which requires India to print more rupees to pay for more expensive oil. So you see, the rupee is sliding. Reserves are bleeding.
So Modi did what every government does when the math stops working. Devaluing the currency turns the bill over to the citizens.
The Quiet Part
Here is the part the headlines almost buried.
Bloomberg noted, in one line, that “Indian banks have recently struggled to import gold due to administrative bottlenecks.”
“Administrative bottlenecks” is the polite Bloomberg phrase for capital controls.
Their government did not ask first and intervene second.
Their government intervened first and is asking second…
That is the order things happen in.
Here is what gold has done while many governments around the world have quietly built the playbook to slow it down:
What This Means for the Average Joe
So what does this mean for the average joe like you and I?
It means the smart-money signal on this story is not the one the headline gave you.
The headline said Modi asks Indians to stop buying gold.
The signal is that gold has become something governments are now willing to publicly fight…
Indians, for the record, have never listened. The 2013 import duty did not stop them. Smuggling routes lit up overnight. The Reserve Bank of India ended up sitting on a domestic gold stash that nobody could measure.
And neither should you.
When governments ask you to stop accumulating monetary metal, they’re telling you the metal is winning.
When governments fight gold, gold wins.
It will especially win in India.
