India gold imports falling
in.biz.yahoo.com
Monday June 10, 12:13 AM
Gold imports likely to fall in Apr-Jun
By Sangita Shah & Janaki Ghatpande Mumbai, 9 June
Gold imports in India are expected to fall drastically in the current quarter and the current financial year as a whole.
Hiroo Mirchandani, marketing director of the World Gold Council, India, said, “Imports during the first half of the year are expected to fall. Primarily because India is a price sensitive market. The prices would need to stabilise. Also there is no significant change in the consumer offtake. With as much price fluctuation, there is a lot of recycling of gold. This could also be another reason why the consumption of gold saw a slump.”
The beginning of 2002 has seen gold prices skyrocket, globally as well as on the domestic front. Crossing the psychological barrier of $320 an ounce in world markets last month and crossing the Rs 6,300 per ten tola bar in India, has made gold a heavily traded commodity. Financial analysts are unanimous in saying that various factors including escalating prices have made gold a good investment.
“For the past three months, India has been a part timer in the world gold markets. This in itself is no small quantity, as India has the distinction of being the single largest consumer of gold in the world. India normally consumes nearly 1/3 of the world mining production or 1/4 of the total worldwide supply,” a leading gold trader said.
Consumption of gold in India in the first quarter of 2002 has fallen 40 per cent to 149.8 tonnes from 249.7 tonnes from the same period last year, according to the World Gold Council's quarterly survey on gold demand trends.
The primary reason for this fall, says the survey, is the sharp rise in the gold prices in February 2002, which lead to the fall in consumption. Other reasons included huge stocks at the beginning of the quarter, impact of the global slowdown particularly in the infotech sector, which resulted in poor sales of consumer goods. “The unrest in Ahmedabad also hampered offtake in the region,” said the survey.
The reason for a 40 per cent drop in the gold consumption is also because of the good demand that gold saw in the first quarter of 2001, said the press release. Consumer demand also fell by 10 per cent in the first quarter at 749.5 tonnes. Investment demand was higher at 125.6 tonnes, by 36 per cent while jewellery demand fell by 15 per cent to 623.9 tonnes.
India generally witnesses a lower appetite of gold at the beginning of the monsoon, especially on the rural demand side.
“In fact with the onset of monsoon, most rural and agro-based populace generally sell back the gold to the jewellers to finance their sowing needs. This gold is again bought back after the harvest,” Sushil Shaha, a jeweller in the interior Maharshtra said.
Moreover, Indian gold market is set apart from the gold markets of the rest of the world primary differential characteristic being --”taxes”. In India, the custom's duty tax slaps on $15.86 (Rs 25 per gm) per ounce of gold. Another 1%, is then levied by the authorised agencies and banks, which sells the gold to the bullion merchants. Thus Indian gold is one of the highest priced in the world.
When the price of gold increases, India stays out of the market until local dealer stocks are depleted and dishoarding comes in to fill the gap. Once the dishoarding falls off, demand once again warrants going back into world markets and paying the added premium of import and agency fees.
"As we observe the buying habits of the Indian market lately, one thing in particular stands out. Indian prices have almost continuously remained below import levels. Other than bites and nibbles in the troughs of the gold price, India has been somewhat absent from the world scene," a trader said.
The pattern seems to be that gold spikes up, leaving a gap between Indian prices and world gold prices. Gold then slips back a bit and just like clockwork, Indian prices rise to meet the legal import level. No sooner do the two levels meet and almost instantaneously, gold powers up, moving out of reach of Indian consumption once again. A shortage that can only be met through the dishoarding of existing Indian held gold to meet Indian demand.
The gold demand statistics provided on the World Gold Council (WGC) web site put year 2001 Indian consumption at 855.2 tonnes. So far, it appears that India will fall far short of last years estimate. This is also due to the increased level of demand outside the Indian market that is keeping world gold prices higher and new gold imports just out of reach.
The catalysts in this market appear to be that of reduced producer hedging, producer buybacks, coupled with investment buying from the Japanese and Germans.
The new players on the demand side, the producers, the Japanese, the Germans and new investment demand, etc., all want gold to meet their needs. The problem is that there is not enough gold to fill their baskets and the baskets of the Indians too. Undoubtedly, there must be winners and losers in the mix. The winners of course, will be determined by who was willing to pay the higher price. And India for sure knows that it can wait for the right time given the gold accumulated over the years, traders said. |
