Consumer appetite for gold is impacted by Govt.-imposed curbs on imports

China emerged as the largest buyer of gold in the world in 2013 having bought 1,066 tonnes. In doing so, it surpassed India as the largest gold consumer.

The Indian consumer’s famed, insatiable appetite for gold was impacted in 2013 by government-imposed curbs on imports of the yellow metal, resulting in total volume demand for gold growing 13 per cent and a mere 3 per cent in value terms.

The resulting squeeze in supply of gold saw India cede its position as the leading globally buyer of gold to China. According to a report released by World Gold Council (WGC) – Gold Demand Trends, in 2013, Indian gold demand grew to 974.8 tonnes; up 13 per cent vis-à-vis China’s demand which rose 32 per cent in 2013 to 1,066 tonnes.

“Unlike China, India has no policy position on gold and gold consumption,” Somasundaram P.R., Managing Director, India, World Gold Council (WGC), told this correspondent . “Indian demand is an aggregate of purchases across the country. Unlike in India, the officially stated Chinese government policy is pro-gold,” he said.

``China wants to play a huge role in the global gold market, and has been systematically moving in that direction,’’ Mr. Somasundaram said. China was now pushing for gold price quotes in renminbi, he said. “Instead of London, they are keen to determine international price of gold,” he pointed out.

Despite several representations by the Indian industry to the government to ease import restrictions on gold, the high import duty of 10 per cent and the 80:20 scheme continue. “The spot premium here is now around $ 200 per ounce,” the WGC India chief said, adding, “import duty has to be brought down as the arbitrage taking place is not at all healthy.”

Consumers could live with high import duty, he said. The 80:20 scheme, however, had put a lot of stress on industry, he said.

In 2013, to some extent, supply was easy in the first-half of the year before restrictions came about, and low prices in April saw heavy buying.

“People plan gold purchases on an annual basis as they allocate resources for the same. Many had purchased their stock in April at low prices,” he said, adding that in 2014, there seemed to be no such benefit likely.

WGC estimated that 150-200 tonnes entered India through the illegal route in 2013.

“If the import curbs continue, the volume of smuggled gold could double in 2014,” Mr. Somasundaram said.

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