Wednesday, May 8, 2013
NEW DELHI -- Gold imports
by India, the world's largest consumer, are set to exceed 100 metric tons for
a second month in May as jewelers rush to beat central bank curbs on overseas
bullion purchases by banks, a refiner said.
The biggest slump in gold
prices in more than three decades on April 15 spurred banks, traders, and
jewelers to import more than 100 tons last month, said Rajesh Khosla, managing director of MMTC-PAMP India Pvt.
Purchases this month will match April's imports, he said. MMTC-PAMP's
refinery in northern Indian state of Haryana can process 100 tons of gold,
600 tons of silver, and make 2.5 million pieces of coins a year, he said.
The Reserve Bank of
India, or RBI, will issue guidelines by the end of this month to restrict
banks from importing gold on a consignment basis as it seeks to reduce
domestic demand and curb a record current-account deficit, the central bank
said on May 3. Banks will be allowed to buy on a consignment basis to meet
only genuine needs of exporters of jewelry. The bulk of the imports by banks
now is on a consignment basis that doesn't require
them to fund the purchase, RBI said.
"The imports this month look as good as in April as everyone is trying
to import as much as possible before the RBI guidelines are issued," Khosla said in an interview in New Delhi yesterday.
"'The price looks good, let's import,' every jeweler seems to be saying.
Time will tell whether they were right or not."
Retail buyers flocked to
jewelry stores and bank outlets in India to buy ornaments and coins after
gold plummeted 14 percent in two sessions through April 15 in the worst slide
since 1983, causing a shortage in supplies. The Reserve Bank has said the
current-account shortfall, exacerbated by bullion imports, and consumer-price
inflation above 10 percent are among risks that constrain room for further
interest rate cuts to revive economic growth from the lowest in a decade.
"At current prices,
it looks the imports will be more than last year," said Khosla, whose refinery is a venture between state-owned
MMTC Ltd. (MMTC) and PAMP SA of Switzerland. "If the central bank wants
to restrict, imports will fall."
India's gold imports
dropped 11 percent last year to 860 tons from a record 969 tons in 2011, the
World Gold Council estimates. Demand for jewelry and investment fell to 864.2
tons in 2012, the second straight year of decline, it said.
India has tripled import
taxes on gold from as low as 2 percent in January last year after the
current-account deficit, the broadest measure of trade, widened and the rupee
slumped to a record against the U.S. dollar. Finance Minister Palaniappan Chidambaram has blamed the deficit on a
"passion" for gold, saying the gap is a greater concern than the
worst budget deficit among the so-called BRIC nations. The deficit widened to
$32.6 billion in the last quarter of 2012.
While bullion has
rebounded from a two-year low of $1,321.95 an ounce on April 16, driven by
coin and jewelry demand from the U.S. to China and India, it is 24 percent
below the record $1,921.15 reached in 2011. Gold for immediate delivery rose
as much as 0.4 percent to $1,458.85 an ounce, and was at $1,454.59 at 10:24
a.m. in Mumbai.
"The global price of
gold seems to have stabilized at current levels," Khosla
said. "Further increase in the price depends on economic recovery in the
U.S. and Europe."
Gold fell into a bear
market in April as investors sold the metal in favor of riskier assets,
spurred by expectations that the global economy was recovering. Holdings in
the SPDR Gold Trust, the biggest bullion-backed exchange-traded product, fell
0.4 percent to 1,057.79 metric tons yesterday, the lowest level since March
2009, according to data compiled by Bloomberg.
Retail demand for gold in
India was good ahead of the wedding season and the Akshaya
Tritiya festival on May 13, Bachhraj
Bamalwa, a director and former chairman of the All
India Gems & Jewellery Trade Federation, said
yesterday. Jewelers are paying between $10 an ounce and $12 an ounce over the
London cash price to secure supplies, compared with $2 an ounce before the
price slump, he said.
Akshaya Tritiya festival
is considered by the country's more than 900 million Hindus as the
traditional day to buy precious metals. Bullion is bought during festivals
and marriages as part of the bridal trousseau or gifted in the form of
jewelry by relatives.
The appetite for gold
continued to be "very strong" in India and an index of physical
flows showed demand five times that of a 12-month average, UBS AG said on May
3. "Appetite is likely to hold up as we get closer to the Akshaya
Tritiya festival," it said.
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