As the price of precious metals that is eschewed daily by status-quo-hugging talking-heads on business media as indicative of the days of hard money being over continues to come under 'pressure', demand for physical gold remains extremely high. With India's festive season about to begin, The Hindustan Times reports a massive surge in gold smuggling in the last 10 days as heavy demand for gold during Dussehra (for which booking and supply starts today when Navratri begins) has dragged 50 tonnes of gold across the borders to avoid the government's capital controls. As Bloomberg adds, physical gold premiums may double by the end of October.
About 50 tonne gold has been smuggled into the country in the past 10 days, and subsequently pushed into the market to cater to a surge in demand for the precious metal in the festive season. There is a heavy demand for gold during Dussehra, for which booking and supply will start from Thursday, when shradh ends and Navratri starts.
Market sources said that 30% of the smuggled gold has been supplied in Mumbai to unscrupulous jewellers, while the rest was distributed to different parts of the country.
Sources said that illegal gold is finding a place in the market because of below average import resulting from the 80:20 scheme and 10% import duty. Against the average monthly demand of 80 tonne, the import is presently around 51 tonne in the country.
Sources said that gold was smuggled into the country through the land route, via Nepal, Bhutan, Bangladesh and Pakistan. “This is because airports have tightened security, restricting the smuggling of gold by the air route,” said a market expert. The Mumbai airport customs, which has started a serious crackdown on gold smugglers, has seized around 529 kg gold from April to August this financial year.
Experts fear that more gold will be smuggled from similar land routes in days to come, as the demand will shoot up once the marriage season begins, in the later part of November. “There will be huge demand because of the festive season, and also the low price at which gold is presently being traded,” said Kumar Jain, vice-president of Mumbai Jewellers’ Association.
Jain said, “The government should immediately bring down the import duty and relax the 80:20 scheme, so that official import goes up. That will bring down the smuggling.”
Rajiv Popley, director Popley Group, said, “Smuggling of gold has been on the rise for the last eight months, due to irrational supply issues. The officially available gold was at a premium, which was higher than anywhere else in the world.”
Popley said that the demand for gold is increasing with the onset of festivities. “Both Dussehra and Diwali are auspicious festivities to invest in gold,” he said.
Gold premiums in India, the biggest user after China, may double by the end of October as the fourth straight quarterly decline in local prices spurs jewelry purchases before the nation’s main festival season.
The fees that jewelers pay banks and dealers may increase to $20 an ounce over the London cash price by the Diwali festival, a level last seen in early July, Bachhraj Bamalwa, a director at the All India Gems & Jewellery Trade Federation, said by phone from Kolkata. The nation celebrates the Hindu festival of lights on Oct. 23 this year.
“Consumers have realized that the government will not take any measures to ease import restrictions soon, so they will stop postponing purchases. Price is the most important factor.”
“We expect premiums to rise but they will still be lower than last year and therefore won’t trouble consumers much,” said Bamalwa. The fees were about $120 an ounce last Diwali and peaked at $160 in December, he said.
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While premiums for physical gold surge, we can only imagine the "thanks" the people of India are offering up to Western Cartel banks in lowering their purchasing prices...