Impact of hike in import duty and stopping of consignment imports of the metal
The news of gold imports into India falling significantly in June coincides with the slack season for gold demand. Although the demand fall has been welcome, the fact remains that June and July normally constitute the lean season for gold buying and the drop has not perturbed traders.
“There is very poor demand and there is no compelling reason to buy gold now — the marriage season is some months away and there are no festivals either,” said Suresh Hundia, Chairman-Emeritus, Bombay Bullion Association.
Gold imports fell 81 per cent in June to 31.5 tonnes from 162 tonnes in May and 141 tonnes in April. Government measures to restrict import of gold are in place as it raised import duty and even stopped consignment imports of the yellow metal.
Last week, All India Gems and Jewellery Trade Federation (AIGJF) asked industry members to stop sale of gold coins and bullion. It claimed to have met with success. “It is a significant step as about 35 per cent of total gold imports went into the investment side, a non-productive investment,” Haresh Soni, Chairman, AIGJF, told The Hindu.
The stoppage of sale would continue till the current account deficit (CAD) crisis passed, he said, adding that consumption could fall by 15-20 per cent as a result.
C. P. Krishnan, Wholetime director, Geojit Comtrade, a commodity trading outfit, said that this period coincided with slack season in India and China. “Combined with recent measures by the government, there has been no investment buying. However, a significant factor is that if the rupee depreciates further, there may be a pick-up in gold offtake.’’
“It is better to have less volatility for some sustained period to ensure some stability in price,” he said.
Mr. Hundia felt that depending on the rupee movement, gold would move in the Rs.25,000-28,000 per 10 gram band for the time being.