Gold traders purchased the bulk of imports in the first three weeks of January, ahead of the import duty hike that came into effect on the 21st.
Author: Shivom Seth
Posted: Tuesday , 29 Jan 2013
MUMBAI (MINEWEB) –
Bullion traders across the country are one step ahead of the Indian government. Even as the government was pondering a proposal to hike customs duty on the import of gold this month, gold imports soared by 15% to 75 tonnes in January.
Though the government did go ahead and ultimately raise duties by 50% from 4% to 6% on January 21, bullion traders cornered most of the precious metal in the first three weeks of the month in anticipation of the hike in customs duty.
India’s gold imports climbed to $56 billion from $21 billion between 2009 and 2012, despite an 81% price hike in domestic prices. The country’s Finance Minister has also indicated that the government is considering stringent measures to curb gold imports.
“On January 2, the Finance Minister said the government was looking to bring down imports. That was enough for the trade, and it led to massive buying across all counters,” said Bachhraj Bamalwa, of the All India Gems and Jewellery Trade Federation.
Post hike, though the quantity of gold imports has declined considerably, shipments are expected to improve in February, given the wedding season in the country, he added.
“Hike or no hike, Indians place an enormous value on gold. They enjoy flaunting their massive collections, especially at weddings,” said Bamalwa.
The wedding season in India is slated to start early next week and will continue until May. The country celebrates around 10 million weddings each year. Several festivals also take place during this period.
“Most middle class families that have a marriage, are wont to spent over $200,000 just on gold. There is almost an equal amount spent on the food, clothes and other decorations at each wedding,” said Jayeshbhai Sota, bullion trader.
India’s appetite for gold, despite rising prices, is mainly attributable to the massive number of weddings that take place in the country, besides the investment potential of the yellow metal.
The big, fat Indian wedding has always been the biggest bet for gold. Two thirds of the gold consumption in the country comes from jewellery purchases to mark weddings and other auspicious occasions.
Traders say this portion of gold will not decline sharply because of high prices or custom duty hikes. At the most, buyers may economise on weight or resort to smaller pieces of jewelry.