Finance minister P Chidambaram, who has appealed to Indians to stop buying gold for a year to bring down the widening current account deficit (CAD), can heave a sigh of relief because gold traders say imports will drop drastically this month and next with a decline in demand. Bullion dealers and jewellers say shipments will be less than the average $36-million imports witnessed in the last fortnight of May. Talking to ET, Haresh Soni, chairman of All India Gem and Jewellery Trade Federation, said, “Demand has already tapered off beginning June and this trend is likely to continue till the middle of August. However, we do not think Indians will stay away from gold as wished by the FM. We know CAD is a major issue before the government. We think the government should put a restriction of using gold as an investment product.”
The finance minister on Thursday reiterated his appeal that people control their craving for gold. He was addressing a press conference to detail the steps being taken by the government to bring the economy back on track. “If we can have for six months or one year almost minimal gold imports into the country, it will dramatically change the situation on CAD and we will see its positive impact on every other index that majors the economy, stock market, exchange rate and interest rates,” he said. Quoting statistics, Chidambaram said: “Net gold imports, averaged $135 million a day, in first 13 business day in May till May 20. However, in the subsequent 14 business days, it averaged on ly $36 million.”
Gold traders say the country’s monthly imports may decline to 40-50 ton each during June and July, a sharp dip from 142 ton in April and 162 ton in May. “Looking at the trend in the first few days, June imports may come down to 40-50 ton. In fact, imports will be lower as demand has come down and jewellers are not restocking because they are watching the situation,” said Amit Sampat, director of Mumbai-based Pushpak Bullions.
In 2012, India imported 864.2 ton of gold and according to World Gold Council’s initial estimates, shipments will cross 900 ton in 2103. The fall in gold imports could come as a huge relief to the government, battling a record high current account deficit of 6.7 per cent of GDP, which in turn has pushed the rupee to a record low.
Samir Sagar, director of Mumbai-based Manubhai Jewellers, however, said India’s appetite for gold will not decline despite the government’s repeated efforts to curb the demand. “We have seen Indians buying even when gold was at a high of Rs.32,000 – Rs.33,000 per 10 gm. The government should come up with innovative measures to unlock the 22,000 ton of unproductive gold locked up in Indian households. Once the rupee becomes stronger against the dollar, gold prices in India will drop and there will be a mad rush for gold again.”
Source: Bullion Bulletin