India gold imports to plunge in festive months after huge pre-GST purchases
mumbai — India’s gold imports could plunge in 2017 during the traditional period of peak demand in the second half of the year, after jewellers have aggressively restocked inventory ahead of a national sales tax that takes effect on July 1.
Lower imports from the world’s second-biggest consumer during its high-demand season could drag on global gold prices that have gained nearly 10 per cent this year as political turmoil in the United States has raised expectations of a slower pace of interest rate hikes this year.
India’s gold imports typically strengthen in the second half of a year as the precious metal is considered an auspicious gift at weddings and festivals such as Diwali and Dussehra.
But the timing of strong purchases looks backwards this year, as the implementation of a goods and services tax (GST) that will replace a slew of federal and state levies has buyers cramming their major activity into the first half of 2017.
“This (strong buying) trend will not continue in the coming months,” said James Jose, secretary of the Association of Gold Refineries and Mints, referring to the tripling in the value of gold imports in April. “Ahead of GST, some people are stocking up fearing higher tax, but demand has been falling (more recently),” he said.
India’s gold imports could hit 450 tonnes in the first half of the year, more than double from the same period in 2016, according to Sudheesh Nambiath, a senior analyst at GFMS, a division of Thomson Reuters. Imports could then fall to 250 tonnes in the second half, about 40 per cent lower than a five-year average for the period of 403 tonnes, Nambiath said.
Gold imports in the second half of 2016 were 313.8 tonnes, up 60 per cent compared with the first half of that year. “Aggressive Indian buying is unlikely to be there in the second half like every year. Global prices need to find support from other sources like exchanged traded funds or have to correct,” said a Mumbai-based dealer with a private bank.