India Sees Gold Imports Surge 65% In June

Published on 16 July 2014

Today’s AM fix was USD 1,297.50, EUR 958.13 and GBP 757.40 per ounce.
Yesterday’s AM fix was USD 1,312.00, EUR 965.20 and GBP 765.51 per ounce.

Gold fell $12.60 or 0.96% yesterday to $1,294.10/oz and silver slipped $0.21 or 1% to $20.71/oz.

Gold In U.S. Dollars and Global ETF Holdings - 6 Months (Thomson Reuters)

Gold’s sell off yesterday was again due to concentrated selling on the COMEX. The sale of over 17,000 contracts or over $2.3 billion worth of gold futures contracts in minutes led to gold falling again. Support is likely to be found at previous resistance at $1,280/oz.

The sell off has led to increased demand for physical gold by buyers globally. In China, the world’s largest importer of gold, the sell off was greeted by Chinese buyers as local premiums edged up to just over $1 an ounce on the Shanghai Gold Exchange (SGE) from a small discount in the previous session.

Gold imports into India surged in June where there was a 65% annual rise in gold bullion imports.

Bullion is India's second-biggest import item after oil and was one of the principal factors in putting it on the brink of a full-scale balance of payments crisis last year.

In a desperate bid to trim a gaping current account deficit, India last year increased import duties on gold and imposed a rule that required a fifth of all bullion imports be re-exported.

Those measures had crimped official supply and pushed up premiums in the domestic market, sparking a huge rise in smuggling. However, a strong rebound in gold imports will likely mean the curbs stay in place for some time.

Finance Minister Arun Jaitley surprised bullion markets by keeping the import duty on gold and silver unchanged at 10% in his maiden budget last week.

India’s huge appetite for gold is due to still very high levels of inflation which are still over 7% - retail inflation in June hit 7.31%, and the continuing depreciation of the rupee.

Gold holdings in exchange-traded products rose 9.7 metric tons yesterday to 1,736.9 tons, the most since October 2012.

Gold price drops this year have led to a marked increase in demand for gold as seen in very large increases in ETF holdings (See chart - Orange is Gold, Purple is absolute change in gold ETF holdings). The smart money in Asia, the West and globally continues to use price dips as an opportunity to allocate to gold.

Leaders of the BRICS emerging market nations launched a $100 billion development bank and a currency reserve pool on Tuesday in their first concrete step toward reshaping the Western-dominated international financial system.

The bank aimed at funding infrastructure projects in developing nations will be based in Shanghai, and India will preside over its operations for the first five years, followed by Brazil and then Russia, leaders of the five-country group announced at a summit.

The new global bank is another sign that the dollar’s days as reserve currency of the world are coming to a close.