MUMBAI: Gold imports by India, one of the largest consumers and importers of the yellow metal in the world, could drastically fall to around 200 tons during 2009 if the current trend continues, says a bullion research outlook released by Commodity Online India Limited (COIL) on Tuesday.
“India managed to import only around 32 tons of gold during January, February, March and April, 2009. Dull imports have resulted in exports of scrap gold from India to destinations like Dubai,” says the COIL report. COIL publishes Commodity Online, the largest integrated global commodities portal.
Global economic meltdown, uncertainty in stocks and commodities markets and volatility in gold prices have had a major impact on India’s gold imports in 2009. In January, gold import by India was a paltry 1.8 tons against 18 tons in January 2008. In February and March, gold imports by India fell to zero levels, the worst in the last one decade.
In April, gold imports picked up momentum, largely thanks to the ongoing marriage season and gold buying religious festivals like Akshaya Tritiya. Bombay Bullion Association said last week that April India gold import was around 30 tons.
Based on India’s gold import in the last four months, and looking at the probability of imports in the coming seven months, the bullion research analysis from Commodity Online says that India will have the lowest gold import in 2009 in the last eight years.
”We expect gold imports by India to be sluggish in 2009. There will not be much momentum in gold sales and imports in the country thanks to the high gold prices, volatility in markets and global economic conditions,” says Nitin Khanna, bullion research head at Commodity Online.
Khanna predicted that gold imports by India could stand around 200 tons this year if this trend continues. He said gold imports and sales will gain in the months of August, September and November thanks to festivals like Diwali and Onam. “However, current bullion trade scenario suggests that countries like China will import more gold than India,” he said.
Following are the Commodity Online research findings on India gold imports:
**In the last eight years from 2000, gold imports by India every year have been between 400-800 tons. In 2008, India’s gold imports dipped by 45 per cent to touch 450 tons.
**India managed to import only around 32 tons of gold during January, February, March and April, 2009.
**Buying of gold jewellery has fallen sharply in the last four months leading to a slump in the yellow metal’s imports.
**Bombay Bullion Association assessment says gold sales and demand have dropped to negligible levels because of high prices and gold and jewellery sector is reeling under a crisis because of high prices and retrenchments across sectors.
**Current gold prices in India are hovering around Rs 14,000 for10 grams. Bullion traders expect gold prices could zoom to Rs 15,000 per 10 grams in the coming months, leading to a dip in gold imports.
**Fall in gold demand has been thanks to high prices of the yellow metal. Gold prices have moved up as investors found heaven in the yellow metal on fear of deflation. But even though investment in gold looks attractive, many investors have been struggling for survival after they lost money in commodities and equity markets.
**Gold prices could zoom to higher levels because of the dollar-euro movements on weak economic fundamentals.
**One major reason why gold imports by India are plunging is because Indian banks have a lot of carryover gold stocks from last year resulting in lower imports.
Quoting bullion analyst and economist Manasee S. Gokhale of National Commodity and Derivatives Exchange (NCDEX), Commodity Online bullion report says that one could question the ambiguity in the India gold import figures year after year and find reason that dates back to history when imports were restricted and the only way gold could be bought to the country was through smuggling.
Under India's Gold Act of 1962, citizens could not hold gold in form of bars and coins and old holdings were to be converted into jewellery. Gold was smuggled in and sold through unofficial channels. Goldsmiths were unorganized labour force then and could not cope with these sudden developments.
Today also, not much has changed and traditional goldsmiths are still largely unorganized. India embarked upon the path of economic liberalization in 1990 and although licensing was gradually dissolved and the 1962 Gold Control Act abolished in 1992, gold retail market remained unorganized.
Gold import was liberalized when the Indian government realised it would be profitable to earn taxes rather than allow smugglers to benefit from these stringent rules and lose it to unofficial channels. Of course, imports have increased year after year, but the market is still unaccounted for and unorganized.
There are about 20 banks who can officially import gold in India and a few other nominated government agencies that do so for their clients and other dealers. Besides these, special import licenses are given to very few players today those who fulfill certain criteria that would enable them to obtain the special license to import gold.
Since last year, premier trading houses have been created and they are allowed to import gold too. When approached and questioned about their quantity of gold imports most of these are tight-lipped and reluctant to give away real figures. The entire channel is so long that it is difficult to find the exact amount of gold that enters the country. This has given rise to ambiguity and large disparity in gold import figures recorded by different research or trading organisations in India.
The study says estimating Indian gold imports has always been a Herculean task and many have debated, counter debated, argued and counter argued over the accuracy of the estimates. Several have tried but none can say that they have the exact figures as to how much gold is imported in India. Hence, gold imports in India have for years now, remained simply ‘approximate calculations’.
If India’s gold imports fall to 200 tons in 2009, it will be less than half of the yellow metal the country imported in 2008.
Source : www.commodityonline.com