Indian Gold

By pjain      Published Oct. 17, 2019, 5:43 p.m. in blog Invest   

Series: Gold - Gold Investing 101

Gold in India, Keys and Trends

Nature of India's Gold Market

  • Gold is quoted in Res per 10 gm for 22 or 24 carat
  • Prices vary in a 6% range by city being lowest in sea-side smuggling centers and highest in urban areas - Kerala and Chennai have the lowest rates in the country - Hyderabad and Bangalore also have ample and mid-rates - probably due to huge international travellers - Mumbai, Kolkata have the highest prices - Delhi is higher but

  • 75% of official gold imports arrive by gold cargo to Delhi Airport

  • Sources include gold bars from Swiss, UAE, Aussies and S.Africa
  • Dore gold bars are imported from Ghana, Peru, Colombia and Bolivia

KEY: Forex Capital Account Highly Negative => Gold is #2 import after Oil

India has 10% GST and Import Tariffs and Regulations

India and Japan, throw up import barriers, taxes and penalties, to block the free flow of gold, impacting local gold prices, and illegals and traders creating and work with gold smugglers many by normal citizens.

The temptation for individual, bulk smugglers and merchants/traders is an easy 10-25% margin to be made.

  • India has 10% GST and Import Tariffs
  • India requires import licenses (corruption to bribe babus to get them)
  • India often outright bans and prohibits gold imports

Demand is solid in Good Monsoons and Higher Crop Production

  • Higher Monsoon rains boost crop production, giving great boost to rural farmer income, and so on through merchants and other classes.

  • So the quality of rains greatly impact gold demand in India.

  • Conversely when the rains are very poor, then gold is sold, and supply increases.

Demand is very Rural with 67% of purchases come from there, Mostly in 22-24 Karat Jewelry

Real Estate was a reason to sell gold, but prices have fallen in 2018+

Smartphones are the New Gold - being higher status and worth paying for than Gold!

Indian Gold Demand is very Wedding seasonal and Festival of Diwali

  • The Indian Wedding season from Oct-Dec is when a huge amount of gold is sold.

  • Also the 5-day Diwali season is considered an auspicious time to buy gold.

Demand Could reduce on GST+Import Tariffs

  • As oil prices high, India's worsening balance of payments could pressure raising import duties on gold to reduce this #2 import commodity.
  • Consumers, are moving away from gold - as no returns, instead putting money
  • Crackdown on black money, demonetization has probably reduced the stockpiling of gold by corrupt people reducing demand.

Rural Population holds 25,000 tonnes of gold

An estimated 25,000 tonnes of gold is held by India’s population as of 2019.

Smuggling

  • Smuggling is mostly by NRIs by plane, then by cross border trucks across porous Pakistan and Nepali borders
  • Shipping mostly by containers is really hard to detect

  • Customs by major ports is probably the highest source of smuggling eg from S. Korea, HKO and China.


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