Wedding bells set to ring in fresh gold demand in India

MUMBAI/BENGALURU: Demand for physical gold was lacklustre in top consumers India and China this week, while the lure of the metal remained stable in Singapore, but India’s peak wedding season is expected to usher in renewed interest for bullion in coming weeks.
Gold is considered an essential part of weddings in India, second-biggest consumer of the metal in the world after China, and it is a popular gift on such occasions.
“The wedding season has started. In the next few weeks, there are many wedding dates, which will boost demand,” said Kumar Jain, a Mumbai-based jeweller.
Dealers in India were charging a premium of up to $3 an ounce this week over official domestic prices, unchanged from last week. The domestic price includes a 10 per cent import tax.

“Gold imports by (jewellery) export houses have fallen sharply in the last few weeks. That’s why the market is in premium, despite moderate demand,” said a dealer with a private bank in Mumbai.
In October, India tightened gold import norms for jewellery exporters by restricting them from importing the yellow metal only for export purposes and not for selling in the domestic market.
Meanwhile, in China, the market for the precious metal remained quiet, with premiums of $5 to $9 an ounce being charged over benchmark rates, as against the $6.50 to $10 range in the previous week.

Benchmark spot gold was on track to register a small weekly gain, hovering around the $1,275.00 level as of 0919 GMT on Friday, but still below Thursday’s mark of $1,284.10, highest in nearly two weeks.
“Dips below the $1,270 level (toward the beginning of the week) spurred some buying, but the upside, (around the $1,280 level) limited purchases,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
Premiums in Hong Kong remained more or less unchanged from last week, in the 60 cents to $1.20 range.

“Premiums are quite low, and except for periodic large sales, the market is quiet,” said Joshua Rotbart, managing partner of J. Rotbart & Co in Hong Kong.

In Singapore, premiums rose to 70-90 cents from the 50 cents last week.
“There has been interest from two segments, the wholesalers and high net worth individuals, so it is still strong,” said Loh Mun Chun, Director, Private Wealth at GoldSilver Central in Singapore.
“The wholesalers need to buy ... to produce jewellery, especially with some spillover demand coming from the Diwali and Dhanterras festivals, while the high net worth individuals ... buy to diversify their portfolio and they have the money.”

Japanese markets were closed for a public holiday on Friday.

Banks may resume consignment import of gold next week

Banks are gearing up to resume import of gold on consignment basis following the government's decision to allow banks to pay the goods and services tax (GST) of 3 per cent at the time of sale instead of import.

Consignment imports, which help the banks give spot delivery of gold when demand rises, had almost stopped since July 1, when the GST regime was rolled out.

“Import is expected to resume from next week as there is clarity on GST calculation,“ said Shekhar Bhandari, business head for global transaction (banking and precious metals) at Kotak Mahindra BankBSE 2.18 %. The volume of import will depend on the demand, he said.
In September, imports surged 31 per cent from a year ago to 48 tonnes as the industry anticipated higher demand during the festival season leading up to Dhanteras and Diwali. Traders said that most of the imports since July 1happened in the form of gold on loan to jewellers. Contrary to industry expectations, sale of gold and jewellery during the Dhanteras-Diwali period fell 30 per cent from a year ago. “It has been a slow start, but we are hopeful that it will gather momentum in the upcoming wedding season, which kicks off on November 4 and continues till mid ­December,“ said Nitin Khandelwal, chairman, All India Gems & Jewellery Trade Federation.

The Khandelwal-led federation is meeting on Friday to work out a promotional scheme for its members. “The scheme is called Lucky Lakshmi and we have started working on it,“ said Khandelwal.
Individual jewellers are also looking at giving discounts during the upcoming wedding season to lure customers. Saurabh Gadgil, chairman, PNG Jewellers said: “Generally we give discounts twice in a year ­ once during the lean season of May-July and then during Dhanteras ­ Diwali period. But this time we may have to offer discounts during the wedding season. It may not be huge discounts that we offer during Dhanteras but may be a reasonable one.“

Gold imports more than doubled in July ahead of GST implementation

Gold imports by India are said to have risen in July on arrival of some delayed shipments booked ahead of the implementation of a new national goods and services tax on the first of last month, according to a person familiar with the information.
Inbound purchases rose to 53.4 metric tons last month from 22 tons a year earlier, said the person, who didn’t wish to be identified because the data isn’t public. Sequentially, imports of the metal fell from 72 tons in June. Total imports during January to July jumped more than 2 1/2 times to 625.5 tons, according to data compiled by Bloomberg. Finance Ministry spokesman DS Malik declined to comment on the data.

While traders and dealers stocked up on gold inventories ahead of the levy of the national goods and services tax on fears of a higher duty, demand is expected to slow in the second half of 2017 as buyers take time to transition to the new regime, the World Gold Council said last week. Consumption is estimated to remain below a five-average of 850 tons and be in the range of 650 tons to 750 tons this year, it said.

“Such an increase in imports is not sustainable because the demand from the consumer side in the market is very slow and interest from the investment side has also dried up on low returns,” said Bachhraj Bamalwa, a director with the All India Gems & Jewellery Trade Federation, referring to the July jump.

Shipments from South Korea climbed in the month as importers took advantage of the lower goods and services tax rate and a free-trade agreement between the two nations, the person said. Imports from most other countries are taxed at 10 per cent versus zero for those from South Korea.

While this is the first time there has been a surge in imports from South Korea, importers have previously made use of free-trade treaties with countries such as Thailand and Indonesia in order to escape paying the import duty, said Bamalwa. This makes a strong case for the import tax to be lowered across the board, he said

Gold imports by India