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Gnanasekar Thiagarajan, Research Director, Commtrendz, said he expected some token announcement by the authorities before Akshaya Tritiya. Now he feels that the government might follow a more strategic and calibrated approach depending on rupee's stability before taking any decision on gold import norms.
India is not the world's top gold consumer anymore. For the first time ever, we lost this title to China. Chinese demand for gold rose 32 percent to a record 1,066 tonne in 2013 while India bought 975 tonne, says a latest World Gold Council (WGC) Gold Demand Trends report. However, on a year-on-year basis, India's demand rose 13 percent in 2013. Higher import duties, slew of restrictions on gold-import implemented by the Indian government and Reserve Bank of India (RBI) over the past two years to fix the country's large current account deficit led to limited supply in the domestic market. This supply crunch pushed premiums and local gold prices even higher, which in turn had some impact on the demand for the precious metal. Meanwhile, India’s current account deficit (CAD) narrowed sharply to USD 4.2 billion (0.9 percent of GDP) in Q3 of 2013-14 from USD 31.9 billion (6.5 percent of GDP) in Q3 of 2012-13 aided by fall in the trade deficit as merchandise exports picked up and imports moderated, particularly gold imports. Now that India's CAD is in a better position, there were widespread expectations among gold jewelers and traders that import curbs would be relaxed sooner than later. But, nothing happened. Gnanasekar Thiagarajan, Research Director, Commtrendz, said he expected some token announcement by the authorities before Akshaya Tritiya. Now he feels that the government might follow a more strategic and calibrated approach depending on rupee's stability before taking any decision on gold import norms. Thiagarajan is hopeful of some positive announcement before Diwali. Apart from weddings, gold-loving Indians consider Akshaya Tritiya and Diwali auspicious occasions for buying the yellow metal. Sandeep Sharma, senior research analyst, Hem Securities believes only when the CAD reaches a comfortable level, these restrictions will be removed, but nothing before that. CA Kaushal Jaini, Head – Wealth Management and Research, Dani Securities also sees no likelihood of any announcement on this front before the next two-three quarters. Does that mean we lost that tag forever? Maybe yes. All the three experts are not too optimistic about India surpassing China's gold demand and regaining its title. From an economic point of view this is good news as we can save lot on forex reserves. Even if imports curbs are removed, China is likely to be the leader because the country uses gold for Quasi financing and that demand could be stronger, says Gnanasekar Thiagarajan. Also, China's reserve position is strong, so they would not put any curbs even if their currency depreciates. That is not the case with India, we would resort to import curbs as soon as the deficit situation worsens, he adds. Sharma sees weak demand for the yellow metal in 2014. "India won't immediately be on the top again," Jaini adds. While analysts may not be too gung-ho on gold, but WGC sees the yellow metal making a comeback this year. In 2014, market estimation of India's gold demand is between 900-1,000 tonne, its report adds.
India is not the world's top gold consumer anymore. For the first time ever, we lost this title to China. Chinese demand for gold rose 32 percent to a record 1,066 tonne in 2013 while India bought 975 tonne, says a latest World Gold Council (WGC) Gold Demand Trends report. However, on a year-on-year basis, India's demand rose 13 percent in 2013. Higher import duties, slew of restrictions on gold-import implemented by the Indian government and Reserve Bank of India (RBI) over the past two years to fix the country's large current account deficit led to limited supply in the domestic market. This supply crunch pushed premiums and local gold prices even higher, which in turn had some impact on the demand for the precious metal. Meanwhile, India’s current account deficit (CAD) narrowed sharply to USD 4.2 billion (0.9 percent of GDP) in Q3 of 2013-14 from USD 31.9 billion (6.5 percent of GDP) in Q3 of 2012-13 aided by fall in the trade deficit as merchandise exports picked up and imports moderated, particularly gold imports. Now that India's CAD is in a better position, there were widespread expectations among gold jewelers and traders that import curbs would be relaxed sooner than later. But, nothing happened. Gnanasekar Thiagarajan, Research Director, Commtrendz, said he expected some token announcement by the authorities before Akshaya Tritiya. Now he feels that the government might follow a more strategic and calibrated approach depending on rupee's stability before taking any decision on gold import norms. Thiagarajan is hopeful of some positive announcement before Diwali. Apart from weddings, gold-loving Indians consider Akshaya Tritiya and Diwali auspicious occasions for buying the yellow metal. Sandeep Sharma, senior research analyst, Hem Securities believes only when the CAD reaches a comfortable level, these restrictions will be removed, but nothing before that. CA Kaushal Jaini, Head – Wealth Management and Research, Dani Securities also sees no likelihood of any announcement on this front before the next two-three quarters. Does that mean we lost that tag forever? Maybe yes. All the three experts are not too optimistic about India surpassing China's gold demand and regaining its title. From an economic point of view this is good news as we can save lot on forex reserves. Even if imports curbs are removed, China is likely to be the leader because the country uses gold for Quasi financing and that demand could be stronger, says Gnanasekar Thiagarajan. Also, China's reserve position is strong, so they would not put any curbs even if their currency depreciates. That is not the case with India, we would resort to import curbs as soon as the deficit situation worsens, he adds. Sharma sees weak demand for the yellow metal in 2014. "India won't immediately be on the top again," Jaini adds. While analysts may not be too gung-ho on gold, but WGC sees the yellow metal making a comeback this year. In 2014, market estimation of India's gold demand is between 900-1,000 tonne, its report adds.
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