Gold bullion imports must see 20% set aside for re-export, tightening legal supplies...
WORLD No.1 gold consumer India yesterday got fresh restrictions on gold bullion imports, with new shipments only allowed where 20% is immediately held for re-export.
"This [new import restriction] will make our life miserable," Reuters quotes Haresh Soni, chairman of the 40,000-member All India Gems & Jewellery Trade Federation.
"[This] would tighten up supply even further than the existing measures already have," says ANZ Bank analyst Victor Thianpiriya, speaking to Bloomberg.
Lower gold bullion imports are "exactly what the government is targeting," he adds, "[but] it is likely to further increase smuggling and the cost associated with import."
India imported 860 tonnes of gold bullion
in 2012, according to data from market-development organization the World Gold Council. Domestic mine supply added only 10 tonnes to that figure, while recycling of existing Indian holdings added a further 117 tonnes.
Fighting a large deficit between inflows and outflows of capital, the Indian government began targeting the country's huge appetite for gold in early 2012, raising bullion import duty three times in as many months.
Raised again to 8% in 2013, however, gold bullion import duty failed to dent India's household demand. The first two months of the government's fiscal year saw average gold bullion imports of 152 tonnes, sharply higher from 2012's monthly average of 70 tonnes.
Reports of smuggling have increased as legal gold imports have eased back
following new terms for wholesalers which already meant they must pay in full for new shipments, without using credit unless they are re-exporting the metal.
"There will not be any shortage of gold for domestic use [but] there will be some impact on prices," reckons Gems and Jewellery Export Promotion Council chairman Vipul Shah, speaking to The Indian Express about the new gold bullion import rules.
India is currently in the typically quiet Chaturmas season for gold demand
, when festivals and weddings are blocked by Hundi tradition. Last month the All India Gems & Jewellery Trade Federation said 65% of its members had consented to halt sales of gold coins and bars for investment, pushing tightening supplies towards much higher-mark-up jewelry instead.
Today the Indian Rupee rallied from near all-time lows on the currency market.