have good news
india to fractional reserve bank gold ! making more available from inventory to sate local demand
and to hit local demand for imported gold, making more available for us
india is also helping china to gather more gold at less cost as india does not view gold as a plus / surplus / mineralized savings
a win - win - win
businessweek.com
India, Largest Gold Buyer, Raises Import Tax to Cut Deficit
India, the world’s largest bullion buyer, increased taxes on gold imports to reduce a record current-account deficit and moderate demand for the precious metal that’s rallied for 12 straight years.
The duty on gold and platinum imports was raised to 6 percent immediately from 4 percent, Economic Affairs Secretary Arvind Mayaram told reporters in New Delhi yesterday. The tariff will be reviewed if imports moderate, he said. Gold climbed after the announcement and was little changed today.
Increased taxes may reduce gold demand in Asia’s third- largest economy after prices jumped 7.1 percent in 2012 as investors and central banks boosted purchases. About 80 percent of India’s current-account deficit, the broadest measure of trade, tracking goods, services and investment income, is due to gold imports, according to the Reserve Bank of India.
“Consumption and imports will fall definitely,” Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade Federation, said in a phone interview from Kolkata. “This will also help the government reduce the current-account deficit.”
Gold for immediate delivery climbed 0.3 percent to $1,690.05 an ounce in London yesterday, and traded at $1,689.95 at 8:41 a.m. in Singapore today. Platinum gained 9.2 percent to $1,680.75 an ounce since the beginning of January.
Standard Chartered Plc said earlier this month that its gold shipments to India soared on mounting concern the duty would be raised. Expectations for the tax increase helped boost premiums in Asia by as much as 50 percent since mid-December, Australia & New Zealand Banking Group Ltd. (ANZ) said Jan. 4.
Gold Shipments“There was a pretty clear sign that people were anticipating something was going to happen and trying to bring in some gold beforehand,” said Dan Smith, an analyst at Standard Chartered in London. “The appetite for gold is so ingrained in India, it probably won’t have too much of a dramatic impact.”
Domestic mutual funds, which offer gold-backed exchange- traded funds, will be allowed to deposit part of the bullion they hold with banks to boost availability for jewelry and gem making, Mayaram said.
“The advantage will be that a part of the gold lying in stock will be brought into circulation and will partially meet the requirements of the gems and jewelry trade,” Mayaram said. “It is hoped that consequently there will be a moderation in the quantity of gold that is imported into the country.”
India’s DemandLast March, India doubled the tax on purchases of gold bars and coins to help narrow the current-account gap. Demand for gold still picked up “significantly” in the July-to-September quarter, the Reserve Bank of India said in its biannual Financial Stability report in December.
The current-account deficit widened to $22.3 billion in the three months to Sept. 30 as a faltering global economy hurt exports, the central bank said Dec. 31. The rupee fell to a record low of 57.3275 against the dollar last year as bullion imports widened the current account deficit to an all-time high.
Gold imports are “a huge drain,” Finance Minister Palaniappan Chidambaram said Jan. 2. Imports by India rose for the first time in five quarters in the three months to Sept. 30, according to the World Gold Council. Purchases jumped 9 percent to 223 metric tons in the third quarter of 2012 from 205 tons a year earlier, the producer-funded group said Nov. 15.
Demand SlidesStill, the country’s demand slid 28 percent in the 12 months through September, as jewelers held a strike in March and April to protest taxes on imports and as local prices surged to an all-time high, according to the council, which ranked India as the biggest buyer in the period. Higher taxes and domestic prices will again be a drag on physical demand this year, said Joni Teves, an analyst at UBS AG in London.
Bullion in Mumbai surged to a record 32,464 rupees ($604) per 10 grams (0.35 ounce) on Nov. 26 and gained 13 percent last year. Gold for February delivery rose 0.5 percent to 30,738 rupees yesterday on the Multi Commodity Exchange of India Ltd.
“In India, people have more belief that gold is the best commodity they can invest in,” said Mohit Kamboj, president of the Bombay Bullion Association. “The increase in duty is too small. The tax won’t impact imports and it will only help increase government’s revenue.”
Buying gold is considered auspicious during religious festivals and weddings in India. The festival season starts in August and ends in November, and is followed by the wedding season.
“The interesting thing will be whether demand holds up now this has actually been announced,” Standard Chartered’s Smith said. “We saw a temporary surge. Maybe we’re going see a bit of weakness now that the implementation has come through,” he said, referring to bullion imports.
To contact the reporters on this story: Siddhartha Singh in New Delhi at ssingh283@bloomberg.net; Swansy Afonso in Mumbai at safonso2@bloomberg.net; Tushar Dhara in New Delhi at tdhara1@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net |
