11/15/13

Gold smuggling into India glittering: WGC makes it official! - The Economic Times
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Gold smuggling into India glittering: WGC makes it official!

By ECONOMICTIMES.COM | 15 Nov, 2013, 12.31PM IST
Post a Com m ent 53 Share 6 Share More

READ MORE ON World Gold Council | savings | Rupee | real estate | P Chidambaram | Inflation | high inflation
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India's penchant for gold is an old hat. In this light, no matter how many restrictions Finance Minister P Chidambaram may have put in place in the recent past to curb the demand, the government continues to dazzle in the glare of the yellow metal. A report by the World Gold Council notes that though the overall demand for the metal in India declined in the third quarter of this year, "gold entering India unofficially through its porous borders helped to meet pent-up demand". "This was together with an influx of recycled gold that was drawn out by higher prices and promotions offered by retailers," the report says. Cautioning on this, WGC Managing Director (India) Somasundaram P R said: "Gold
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The countrys gold market has been subject to much scrutiny in recent months, as the government has implemented measures to reduce gold imports.

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economictimes.indiatimes.com/news/economy/foreign-trade/gold-smuggling-into-india-glittering-wgc-makes-it-official/articleshow/25812945.cms?utm_source=

11/15/13

Gold smuggling into India glittering: WGC makes it official! - The Economic Times

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investments quarter against the demand of 148.2 tonnes for the same period last year ... If this supply restrictions continue, the demand in the fourth quarter will be met through unofficial channel

which has grown significantly." The country's gold market has been subject to much scrutiny in recent months, as the government has implemented a string of measures intended to deliver on its firm commitment to reduce gold imports. On top of a total ban on the import of gold coins, tight restrictions were imposed on gold bullion imports, tying them to a fixed level of exports. The 80:20 rule now in place stipulates that 20 percent of all gold imported must be exported

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before further imports can be made. The confusion over the complex new regulation hampered the market, the WGC report notes. So, too, did a sharp depreciation of the rupee, which pushed up local gold prices to near record levels, and the seasonal inauspicious period of Shradh (from mid-July and midAugust) during which gold purchases are typically postponed, the report says. "Supply constraints and high inflation resulted in decline in gold demand by 32 percent to 148.2 tonnes in third quarter of this year as compared to 219.1 tonnes in the same period last year," Somasundaram said on Thursday, the day WGC released its report. Both gold jewellery and investment demand declined by 23 percent and 48 percent, respectively, in the third quarter of this year, the report said. Recycled gold almost doubled to 61.3 tonnes from 34 tonnes in the same period, the WGC report added. China may topple India as top gold consumer: The WGC report also noted that China, with an estimated demand of 1,000 tonnes, may topple India as the world's top gold consumer. The industry body cut its outlook for Indian demand in 2013 to around 900 tonnes from the 1,000 tonnes predicted previously. Gold outlook: Since the start of 2013, gold prices have been volatile and a tiff was seen between the bulls and bears. After seeing a level of Rs 24,830 in the month of June 2013, the yellow metal clocked a life-time time high of Rs 34,997 in August 2013. On Thursday, the metal ended at Rs 30,249.0 on MCX. Analysts at top brokerages highlight some reasons why gold may continue to command its position in an investor's portfolio: India's love for gold: Gold stock in India is estimated to be around 20,000 tonnes on the lower side and about 40,000 tonnes on the higher side. Around 70 percent of India's gold stock is held in rural India. According to the CSO (Central Statistical Organization), gold and real estate savings in India account for about two-thirds of the total household savings, thus accounting for over 72

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11/15/13

Gold smuggling into India glittering: WGC makes it official! - The Economic Times

percent of domestic savings. Only around 3 percent of total savings is seen entering equities. Gold accounts for just around 3 percent household savings in the West. This clearly shows how strong platform gold has created over time in India. Festive season demand: Coming to what's happening right now in the domestic bullion market shows that demand slowed drastically as compared to the last festive season. While compulsive gold shoppers would yearn to buy gold coins and bars, because of the tight supply conditions they may not be able to do so. On the other hand, jewellers are seen offering discounts on making charges in order to lure buyers. Falling ETF gold holdings in the international markets along with the reducing safe-haven appeal of the yellow metal have led to investors becoming cautious towards the commodity. Rupee depreciation: Over the year, gold prices in dollar terms are down by around 21 percent, while in the Indian markets, the yellow metal has slumped only around 3 percent. The currency's depreciation has played a key role in preventing sharp losses in commodity prices in the Indian markets. Over the year, the domestic currency has depreciated more than 12 percent and this sharp weakness has come in as a supportive factor to prices.

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Gold smuggling into India glittering: WGC makes it official! - The Economic Times
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