By A. Ananthalakshmi
SINGAPORE, Nov 14 (Reuters) – Strict rules on gold imports
are succeeding in curbing demand from India, with the nation
likely to lose its crown as the world’s biggest consumer of the
precious metal to China, the World Gold Council said.
The producer-funded industry body cut its forecast for
demand from India in 2013 to around 900 tonnes from the 1,000
tonnes predicted previously, although that would still mark a
slight rise from last year.
Global appetite for gold fell 21 percent in the third
quarter as outflows from physical bullion funds and the drop in
buying from India offset firmer jewellery, coin and bar sales, a
quarterly report from the WGC showed on Thursday.
“The administrative measures that the Indian government has
imposed on the market have proven to be quite effective and
imports have slowed down,” Albert Cheng, WGC’s managing director
for the Far East region told Reuters. “It would be difficult to
get to 1,000 tonnes.”
The body maintained its China forecast of a record 1,000
tonnes of demand in 2013.
India, grappling with a high trade deficit and a weak rupee,
imposed a series of measures this year to crimp demand for the
metal – the second most expensive item on its import bill after
oil.
It introduced a record 10-percent duty on gold imports and
tied the volume of imports to exports, making it more difficult
and expensive for gold to be sold to domestic markets. Imports
plummeted to 24 tonnes in October from a record 162 tonnes in
May.
But the WGC warned that gold was finding its way into India
through unofficial channels. It did not give an estimate on
supply through smuggling.
“Gold entering the country unofficially through India’s
porous borders helped to meet pent-up local demand, together
with an influx of recycled gold that was drawn out by higher
prices and promotions offered by retailers,” the WGC said in its
quarterly report.
“It is likely that unofficial gold will continue to find its
way into the country to satisfy demand.”
The rural population accounts for about 60 percent of
gold-buying in India, where the precious metal forms a key part
of a bride’s dowry and is considered auspicious as a gift or
offering at religious festivals.
Based on WGC’s third-quarter report, demand from India so
far this year has totalled 714.7 tonnes, lower than mainland
China’s 779.6 tonnes.
“If not for administrative measures, India would have seen
growth like China,” Cheng said.
Demand from China has jumped nearly 40 percent this year.
Appetite for jewellery and bars and coins has remained strong
throughout the year even during the historically weak third
quarter due to a near 25 percent drop in gold prices.
Fourth quarter demand will also remain strong as buying
picks up ahead of the Chinese New Year at the end of January,
Cheng said.
(Reporting by A. Ananthalakshmi; Editing by Joseph Radford)
