The truth behind the saying “never let a crisis go to waste” transcends both time and space, and it most certainly has no problem crossing the border into India, which over the past weeks has found itself in full monetary crisis, and whose currency is plunging to fresh record lows on a daily basis forcing its central bank to scramble with both tightening and QE at the same time. And if the influential Hindu Business Line, is correct, India’s crisis is about to become someone’s opportunity. Potentially for that someonewhich over the past two months has found themselves in a huge physical gold shortage as the now constantly negative GOFO rates confirm. Because according to Royal Bank of India sources cited by the HBL, India is now considering leasing out the 200 tonnes of gold it bought from the International Monetary Fund in 2009.
For India, this may be the nuclear option: its central bank, starved for dollars, is considering every initiative to procure short-term dollar liquidity to fund massive USD-denominated investor withdrawals out of the country, which as hammering the Indian Rupee, and which if unmet, threatens the entire financial system in the country.
Indeed, as the HBL reports that the gold will be leased in the international market for dollars so as to shore up the sagging rupee, which plunged below Rs 64 against the US dollar in Tuesday’s trade. A final decision may be taken next month, Finance Ministry sources said.