After a multiple-week hiatus on India’s gold imports, traders will start buying the yellow metal again over the next week, Reuters reports. The Reserve Bank of India (RBI) unintentionally halted imports in July when it created a rule so complex that banks – India’s main importers – stopped buying the metal altogether.
Under the new measures, buyers will have to re-export at least 20% of the gold they bring in. With a better understanding of the new law, the country’s gold traders will start buying again in preparation for India’s festival and wedding season – a period when demand for bullion is generally very high.
A strong appetite for gold has been the second largest contributor after oil to the country’s current account deficit which stands at nearly 5%. The RBI’s frustration with the country’s excessive gold buying reached a peak last month after data revealed increasing imports in July. In response, the Bank introduced a series of new laws aimed at curbing demand, including the one-fifth rule.
Most recently India’s finance minister P. Chidambaram raised import taxes on gold from 8% to 10% and banned the sale of gold coins without a license from the foreign trade office.
Source: Bullion Bulletin