India’s Appetitie For Gold Rises
High Inflation, Higher Gold Prices or Booming Stock Markets, it does not matter. In India, when it comes to Gold it’s always the most preferred mode of investment.
A lot has spoken and written about Gold as investment class, safe asset and Indian cultural connect with the yellow shiny metal.
At the start of this month, Gold prices in India were expected to decline on anticipation of likely cut in import duty by the government of India in the Union Budget.
Despite, expectations of duty cut and lower Gold prices in the near future, Gold imports for the month of June have come as a major surprise.
As per the official trade data released by the government agency on 16 July, 2014, India Gold imports zoomed by 65 per cent in June 2014 to $ 3.12 billion as against $ 1.88 billion imported in June 2013.
Interestingly, Gold imports had last risen in October 2013, when prices hovered around Rs 30,000-mark in India. Thereafter for the next seven months Gold imports in India had been declining even as prices fell to Rs 26,500-odd levels.
It may be recalled that the Indian government had taken stringent measures to restrict or dis-courage Gold imports in order to bring Indian CAD (Current Account Deficit) under control.
The significant jump in Gold imports pushed India’s trade deficit to $ 11.76 billion in June from $11.28 billion. Given the over double-digit trade deficit numbers, any relief on the customs duty front now seems unlikely.
The custom duty for Gold imports stands at elevated 10 per cent level. India is one of the largest importers of Gold, which is majorly consumed by the Jewellery industry.
According to World Gold Council, the global demand for Gold in Q1 2014 stood firmly at 1,074 tonnes as against 1,077 tonnes in Q1 2013. As per a detailed study, there was negative growth rate from across all sectors for Gold, except for Jewellery which showed a 3 per cent rise in demand. The data for Q2 2014 is awaited, as of now.
Back home, Gold price today in India continue to trade around Rs 27,700-odd levels, and are likely to consolidate in the range of Rs 26,000-29,000 as policy action on the customs duty front may get delayed.
Also going ahead in the second-half of the moonson season, India gets into the festive season with major Hindu festivals like – Raksha Bandhan, Dahi Handi, Ganapati followed by Diwali. Hence, Gold demand in India is likely to rise in the second half of the calendar year.