Glitters of gold might not have attracted the global jewellery lovers where overall gold demand fell to a five-year low during 2014 but Indians, on the contrary defied their government’s attempts to curb imports and increased their gold jewellery purchases by 8%. India had its strongest year for jewellery demand since the World Gold Council’s (WGC) records began in 1995, up by 8% on a year ago to 662 tons, according to the report ‘Gold Demand Trends – 2014’ report made public by Mr. Somasundaram PR, MD of the WGC’s India operations.
India also continued to enjoy top position and lead over its nearest rival China by consuming gold 842.7 tons of gold in 2014 while China’s consumption was 814 tons. Although China saw a 33% decline in demand year on year, it still represents the second best year for jewellery demand in China. But overall consumption of gold in India fell by 14% in 2014 led by a sharp contraction in investment demand, which fell in response to restrictions on gold imports.
“Smuggling of gold reached to 175 tons last year. However there are market expectations that it may come down if government reduces the import duty from 10%. But in spite of Despite the restrictions, the festival buying, bridal demand and general upswing in economic sentiment have led to jewellery demand hitting a new high in India,” Mr. Somasundaram said.
Stressing the need for a national policy to encourage domestic gold recycling and encourage gold coin sale, he said…
“Banks should be allowed to buy back gold coins which it sells and to create an investment avenue for retail investors. Since India is lacking in measures to become a price setter, countries such as China, Dubai and Singapore are taking measures to lead from the front. China, the largest producer of gold, has already expressed its desire to price its gold consignments in yuan while Singapore has recently launched kilobar gold contracts to attract Indian bullion traders.”
“I feel that discussions on gold in India must move beyond gold import curbs and must focus on how this industry can fulfill its vision to make a major contribution to the country’s prosperity in the next five years. We (India) should support this vision by creating a favorable eco system which deals with gold as a fungible asset category, reflecting our cultural and economic significance. We must find ways of mobilizing and monetizing the household savings now imbedded in gold stocks through the formal financial sector for the benefit of the economy as a whole. It’s now hi-time to re-engage all stakeholders to develop a comprehensive long term gold policy which is affiliated to India’s growth objectives. India also needs to follow the example of Turkey’s book that has undertaken gold reforms to bring out “stocks under the pillow” and to reduce imports and curb smuggling,” he added.
“The outlook for India is for another year of strong jewellery demand in 2015, on the basis that the government does not impose further market-distorting policies and price volatility does not unsettle the market. Looking at the market sentiments, gold prices this year are expected to remain stable with a downward bias if the government considers bringing down customs duty to 2% and easing import curbs further,” said the report.
Posted by Suresh Chotai
