Gold Import Rules Likely to Stay Until Next Year: World Gold Council

Mumbai/Singapore: Indian gold demand in 2014 will fall below last year's record levels as import restrictions are expected to remain in place, despite an improvement in demand in the second half of the year, the World Gold Council (WGC) said.. Demand in 2014 will be 850-950 tonnes, the industry body said, down 50 tonnes from its earlier forecast. China's demand forecast was also lowered to 900-1,000 tonnes from an earlier 1,000-1,100 tonnes.. The forecasts put consumption in India and China below record purchases of 974.8 tonnes and 1,120.1 tonnes respectively last year, when gold prices slumped 28 per cent after a 12-year bull run. Global gold demand fell 16 per cent in the second quarter, according to WGC's quarterly report released on Thursday.. Consumers had brought forward their purchases after the sharp price drop last year, eating into 2014 demand. Second-quarter demand in India fell 39 per cent, while in top buyer China demand halved, the report said.. In India, tough rules on imports - which have hurt demand - could remain in place for the rest of the year, as uncertainties over oil prices and US monetary policy could deter the government from any easing, said Somasundaram PR, head of the WGC's operations in India.. Struggling with a high trade deficit, India last year raised its gold import duty to a record 10 per cent and made it mandatory to export a fifth of all bullion imports. Gold is India's second-biggest expense on the import bill after oil.. "What's the point in relaxing everything and be faced with a higher interest rate scenario and higher oil prices," said Somasundaram. "Given all that I think (the rules) might extend into the first quarter of next year.". Market expectations for a duty cut had climbed after the election of Narendra Modi, who leads the pro-business Bharatiya Janata Party, as India's new prime minister.. PM Modi had earlier indicated his willingness to remove the curbs, saying any action on gold should take into account the interests of the public and traders, not just economics and policy. But the import duty was left unchanged in the new government's first budget in July.. With the restrictions expected to stay, smuggling will remain rampant, with the WGC predicting that illegal gold supplies will be about 200 tonnes for the year. In 2013, the WGC had estimated 150-200 tonnes of unofficial supplies.. The lure of big profits from avoiding duty has led to rampant smuggling.. On the demand front, Somasundaram said Indian consumption could climb to 500 tonnes in the second half, about 27 per cent higher than the first half.. "We are entering Diwali with a slightly better mindset and the consumers are also clear that a price drop or an import duty cut won't happen in a hurry," he said, referring to the Hindu festival when it is considered auspicious to buy gold.. "So the fact that the uncertainty is gone and normal purchasing behaviour will return, we expect the second half will be better than the first half," he said.. The first half of 2013, particularly the second quarter, was an unusual period for gold purchases globally as a sharp plunge in prices set off a rush to buy gold jewellery, bars and coins.. Copyright: Thomson Reuters 2014

Gold Import Rules Likely to Stay Until Next Year: World Gold Council

NDTV Profit

NDTV Profit

Follow Us

DOWNLOAD THE APP