India Gold Imports Surge - First Half 2017 Higher Than All 2016

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- India gold imports in H1, 2017 greater than all of 2016
- India imported 521 tonnes of gold in first half of 2017
- H1 figure for gold imports $22.2 Bln versus $23 Bln in all '16
- Gold demand was up 15% year- on-year in the first quarter
- June gold imports climbed to an estimated 75 tonnes from 22.7 tonnes a year ago
- Annual total set to surpass 900 tons, strongest year since '12
“I trust gold more than the currencies of countries” - 63% of Indians in Survey

Editor: Mark O'Byrne


Gold imports into India have surged in the last six months thanks to festivals, economic recovery and concerns over a new tax regime and the push for the cashless society in India.

Imports totalled 521 tonnes in the first half of this year, compared to just 510 tonnes in all of 2016.

Should buying levels continue then India could end 2017 having imported over 900 tonnes, a level not seen since 2012.

These figures are impressive given where the country’s gold demand was at the end of the 2016. The low figure of just 510 tonnes imported in the entire year was mainly thanks to a range of political and economic issues which had a more negative role than anyone foresaw.

Many of those issues are now resolved, but some had lingering effects. Some good, some bad. So it is with tentative celebration that we look at this boost in gold demand from the world’s second-largest lover of gold and ask how the country has begun to favour gold once again and if it will continue at pace.

2016: A tough year for gold buyers

Last year physical gold demand - for gold coins, gold bars and jewelery - in India hit a seven year low not because of a loss in interest in the precious metal but thanks to a range of political and economic factors.

The biggest of these events was of course the sudden announcement by the government to immediately remove all Rs500 and Rs1,000 notes by 30 December. A total of Rs15.44 trillion ($220 billion) – or 86% of the currency in circulation – was abandoned almost overnight.

Whilst many internationally and in India itself, especially their many small and medium enterprises, looked on in horror at the impact this had on savers and on the economy, the Governor of the Reserve Bank of India, Urjit Patel’s prediction that the economic recovery would be ‘V’ shaped has come to fruition.

The World Gold Council’s June newsletter draws attention to two significant indicators, the Composite PMI and the sale of motorcycles, which have demonstrated this V-recovery.

The sale of motorcycles are a good indicator of the health of India’s cash economy. Last year sales halved in one month, to their lowest in six years. The PMI dropped to its lowest level on record. Both have since rebounded.

Whilst there are still some controls on cash, new money has been printed and is making its way into circulation. Cash in circulation has increased by 58% in the first half 2017, this will no doubt help the economy past the liquidity squeeze.

2016 wasn’t just about the war-on-cash in India. The gold market was also negatively affected by a prolonged jewellers strike. Sales of gold were crippled across the country as a result. The strike is now over and supply of jewellery to the market has reportedly returned to normal levels.

Cashless push, good for gold

In the short-term the removal of 86% of the country’s cash was clearly damaging to physical gold demand and there are some lingering effects that will continue to impact the market.

The first of these is that as of April 1 2017, all cash transactions over RS200,000 (US$3,000) are banned. This is likely to prove problematic for those in rural areas where access to banking, cheques and electronic payments is not common.

We obviously don’t know what the impact of this will be. It may curb gold purchases all together, or we may see a change in gold buying behaviour namely pushing demand onto the black market or buyers spreading their purchases over a period of time.

The above is a negative, but something which is only likely to impact in the short-term. If at all, it may not given the ruling came into play in April and purchases have remained strong since then. Ultimately over time buying behaviours will change rather than the desire to hold gold.

How do we know this? Aside from India’s gold demand holding strong over hundreds of years a fantastic World Gold Council survey carried out last year found the following results:

“I trust gold more than the currencies of countries.”
63% of respondents in India agreed with the statement.

“Gold makes me feel secure for the long-term.”
And 73% of respondents in India agreed with the statement.

Whilst the survey was carried out before November 2016, we have little doubt that the sentiments echoed in the WGC’s survey are even stronger given the somewhat underhanded way in which the government went about removing cash from circulation -  and the severe impacts on many ordinary Indian savers and business people.

Will strong demand keep going?

Whilst the country appears to have recovered from the demonetisation of November-December 2016, there are new factors which will both negatively and positively impact the demand for physical gold.

One of these is the new change and simplification of the GST. Last month the government announced an increase of GST on gold products from 1.2% to 3%.

It is likely that much of the rush to buy gold in the first half of the year was partly due to concerns over the forthcoming rate hike. Gold dealers were likely looking to stock up on gold, ahead of any planned increases in the price. Therefore we may see a drop in demand now the GST rate has been announced and recently implemented.

Or we may not. The change in GST could add some much needed efficiencies to the Indian gold market. Despite the increase in GST, the move was ultimately welcomed by the gold market who had expected a higher hike, to perhaps 5%.

As the WGC wrote in last month’s report: GST should eliminate double taxation and improve supply chain efficiencies. It can make the gold industry more transparent which, coupled with recent hallmarking legislation, should ensure gold buyers have confidence in the gold products they buy, rather than continuing to suffer from the gross level of under-carating they have previously endured.

This is particularly good news when you consider the inflation-busting wage hike that government employees and pensioners are due this year. This will no doubt support demand for physical gold as will the additional income farmers are currently enjoying following the bumper agricultural crop in 2016, following the best monsoon in three years.

Gold demand cannot be calmed in India
Both rural and city incomes are set to climb in the coming months thanks to these factors, so it is unlikely a small increase in tax will put off anyone intending to buy gold.

Of course, in the short term it is likely GST will pose challenges for the industry, particularly for small artisan jewellers. But overall the move is likely to put more confidence in the marketplace.

Like everything in markets, pictures tell a very different story when you look at the long and short-term factors. Last year, gold demand in India was very weak. Stories circulated about the growing middle-class and their lack of interest in the gold that the older generations have so desired.

Long-term, there have always been changing fortunes, changing government policies and factors which will both positively and negatively impact the demand for gold. However, gold demand has always remained strong and India, alongside China, remains the world’s top gold buyers.

Conclusion
Observers are right to be positive about Indian gold demand in the long-term. Economic growth will likely continue to push demand higher thanks to the groundswell of young Indians set to enter the workplace, growing middle class incomes and the poor performance of the rupee as a store of value.

There will inevitably be peaks and troughs and ebbs and flows along the way, but gold will remain a key part of the Indian 'saving DNA'. Therefore India will continue to be a vital and significant source of demand in the global gold market.

 

News and Commentary

Gold books gain for second straight session (MarketWatch.com)

Emails show Russian prosecutor offered Trump Jr. information on Clinton (Reuters.com)

Gold turns higher as US stocks stage brief drop (FXStreet.com)

Gold positive but upside limited as Yellen testimony looms (Investing.com)

U.S. Stocks Rebound From Early Shock, Oil Rises (Bloomberg.com)

Want to Know What's Really Out of Favor? Gold (TheStreet.com)

Gold Stocks' Summer Bottom (MarketOracle.co.uk)

Gold - Pet Rock Revisited (TFMetalsReport.com)

The Breaking Point & Death Of Keynes (ZeroHedge.com)

India Removes 220 Tons of Physical Gold (GoldSeek.com)

Gold Prices (LBMA AM)

12 Jul: USD 1,219.40, GBP 947.60 & EUR 1,064.29 per ounce
11 Jul: USD 1,211.90, GBP 938.98 & EUR 1,063.68 per ounce
10 Jul: USD 1,207.55, GBP 938.63 & EUR 1,060.11 per ounce
07 Jul: USD 1,220.40, GBP 944.47 & EUR 1,068.95 per ounce
06 Jul: USD 1,224.30, GBP 946.14 & EUR 1,077.51 per ounce
05 Jul: USD 1,221.90, GBP 945.87 & EUR 1,078.45 per ounce
04 Jul: USD 1,224.25, GBP 947.32 & EUR 1,078.81 per ounce

Silver Prices (LBMA)

12 Jul: USD 15.83, GBP 12.31 & EUR 13.82 per ounce
11 Jul: USD 15.51, GBP 12.02 & EUR 13.61 per ounce
10 Jul: USD 15.22, GBP 11.82 & EUR 13.36 per ounce
07 Jul: USD 15.84, GBP 12.29 & EUR 13.88 per ounce
06 Jul: USD 16.01, GBP 12.36 & EUR 14.09 per ounce
05 Jul: USD 15.95, GBP 12.36 & EUR 14.09 per ounce
04 Jul: USD 16.15, GBP 12.48 & EUR 14.23 per ounce


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Maestro Maestro's picture
Worse than the bankers rigging gold and silver prices and not having the gold that they sold you (or selling gold that they don't have via fraudulent LBMA unallocated paper spot contracts or COMEX Futures contracts) is the fact that we don't even have MONEY today.  Therefore all financial transactions and economic numbers predicated on the existence of money are FRAUD and FORGERIES presently. Electronic digits and paper fiat currencies in use today are NOT money, according to the law of the country that issues the reserve currency of the world, the US Dollar (Article 1, Section 10 of the US Constitution); or by the tenets of the science of Economics (i.e., fiat currencies are not money because they are not a store of value nor a unit of account due to the fact that NOT ONE fiat currency's value is actually determined or stipulated in concrete legal terms).  Dollars and Euros and Yens are not even lawfully DEFINED as to what they all are exactly; what their economic worth and transactional value is. Hence, fiat currencies simply cannot constitute the legal foundation of any lawful contract! (Also, there cannot be either inflation nor deflation in the ABSENCE of money.  Both inflation and deflation are monetary events which cannot take place where there literally is no money.) What we have today is massive GLOBAL FRAUD mascarading as a monetary system based on the (fraudulent) US dollar because all fiat currencies are basically only a derivative of the US dollar, including the Euro, the Yen, the Yuan, the Rouble, the Shekel and the Riyal. Furthermore, Why do a few people get the right to print fake fiat money out of nothing and buy your goods and  services with it whereas you have to WORK to obtain the same worthless money created out of nothing? THAT is the question at the heart of the matter.  That the bankers manipulate interest rates or the price of gold via fraudulent Futures trading (by selling gold that they don't have) with fiat money is a moot point. To put it differently: why do the bankers get to have anything that they want without working for it and you, you don't? All this talk about market rigging, monetary theory and fraudulent (paper) gold trading is a cover-up for INJUSTICE. The US Constitution FORBIDS the use of debt as money; the US Constitution proscribes (debt) notes which is what the US dollar is presently.  Think, all other currencies are just another name for the US Dollar. What passes for money today is a CRIME, no more no less. People, You are all aiding and abetting this crime every time you buy, sell, pay or get paid. And then you ask, Why our leaders, the politicians, the bankers, and our military men and women are EVIL? The answer is, because they are just like YOU. They are your sons and daughters. ======================================================================= A Viable Monetary System With Gold, Silver And Trust As Its Foundations 1) Gold and silver circulating as two independent forms of money without fixed, but (truly free) market-determined ratios to each other.  Plus; 2) Currency redeemable in gold and silver at non-fixed fluctuating rates, circulating alongside, and competing with, precious metal money. 3) A nonprofit national bank that issues gold- and silver-backed currency only, but NOT debt- or credit-generated money. 4) A private for-profit banking sector that can issue loans for productive enterprise or sensible purchases or even speculation purposes. NO reserve requirements and FRACTIONAL banking is permitted.  But; credit, scrip, funds or capital based on, or generated through, these loans are not legal tender nor payment in full for any good or service.  Any such loans must be repaid in gold-backed legal tender, or gold, or actual material items or valuable services or intellectual property, as specified in the contract between lender and borrower.  This ensures that the banker is only somebody trustworthy who is actually capable of providing a valuable service to the community by virtue of introducing business partners to each other and facilitating their business with liquidity or credit, in the form of loans that people have confidence in.  Essentially, the private banker's capital is his reputation and the trust that people place in him. However, NO FDIC, i.e., NO arrangements or institutions that permit the socialization of losses and the privatization of profits. The National Bank does not guarantee private currency, scrip, funds, nor private loans.  You gamble, you may lose. The banker gambles, he can lose. The banker cheats, he faces justice. This monetary system represents the best compromise between individual freedom and social justice, and a viable foundation for our civilization. http://goldasmoney-art.blogspot.com
sharkbait's picture

do you expect anyone to read this?

JRev's picture

If you're gonna blatantly steal someone else's charts and research, the least you could do is give them credit:

https://smaulgld.com/indian-gold-imports-record-2017/

https://www.youtube.com/watch?v=jiJ3ooBkSaM

GRDguy's picture

India knows very well how their gold was stolen the first time around by London.

They ain't gonna give it up so easily this time.