Gold imports to India have surged, topping 100 metric tons in April, and they are expected to again exceed 100 metric tons in May. China gold imports also are up, a market response to a dramatic drop in gold prices, a trend not expected to end any time soon.
“It’s a great opportunity to invest in gold now – and being in India, gold can never go to waste,” writes financial analyst Hamsini Amritha.
For reference, China imported an incredible 223 metric tons of gold during the month of March, topping the previous monthly record of just over 100mt.
The escalation of gold imports in India can also be attributed to threats of new taxes on gold imports, pushing traders and jewelers to “beat central bank curbs on overseas bullion purchases by banks.”
Guidelines restricting banks from importing gold on a “consignment basis” will be set in place by the Reserve Bank of India (RBI) later this month in an attempt to “reduce domestic demand...” Banks will be able to buy on a consignment basis “to meet only genuine needs of exporters of jewelry.”
The Managing Director of PAMP India states, “The imports this month look as good as in April as everyone is trying to import as much as possible before the RBI guidelines are issued.”
Nonetheless, the heavy surge of gold imports to India will not abate anytime soon. “What we are seeing currently in India is unprecedented,” says Rajesh Mehta, Chairman of Rajesh Exports, one of India’s largest jewelry retailers. “In the past week alone we have sold ten times what we normally sell. If the prices remain at the current levels or go down further we may see a new wave of buying.” An “index of physical flows showed demand five times that of a 12-month average,” according to UBS.
The World Gold Council just stated per ounce premiums are $30 over the London spot price in India, and $12 over the London spot price in China.
World Gold Council adds that central bank gold demand hit a record in 2012, and so far in 2013, is on course to beat that record.
Amritha’s statement that gold in India will “never go to waste” underscores the fact that gold has “always been a top priority for most Indian investors, who prefer it over anything else.” For centuries, gold has been considered to be “synonymous with social status and prestige in India” and is often passed on as “inherited legacy.”
Without a change in price, as the Akshaya Tritiya festival on May 13th and the wedding season approach, Indian and Chinese demand for saving in gold will remain at these record levels.
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