India Aims to Restrict Gold Imports As China Breaks New Records

  on May 08 2013 9:14 AM

Today’s AM fix was USD 1,454.00, EUR 1,108.74 and GBP 939.09 per ounce.   Yesterday’s AM fix was USD 1,463.00, EUR 1,118.67 and GBP 941.74 per ounce.

 

Cross Currency Table – (Bloomberg)

Gold rose $17.90 or 1.22% yesterday to $1,452.00/oz and silver finished down 0.29%.

The Reserve Bank of India issued a set of guidelines last week increasing restrictions on gold imports. According to UBS precious metals research they targeted the following areas: 

1. To decrease gold imports, they aim to restrict local banks gold consignments.

2. Implement a restriction on using gold coins as collateral, limited to coins that are 50g.

3. Rules regarding non-bank lending against gold collateral will be set, covering regulations on ‘loan-to-value ratio, branch expansion, and review of Fair Practices Code provisions with regard to auction and transparency in loan terms.’

Silver, commonly known as, the poor man's gold, is seeing a reverse trend in India compared to the world market where a drop in silver prices has increased demand.

In India, the demand for silver jewellery has fallen significantly and the investment demand has run dry even though the price has fallen to Rs 46,000 per kg. This looks to decrease the country's silver imports by 12% to 2,200 tonne this year from 2,500 tonne last year.

Gold in USD, 1 Year – (Bloomberg)

Gold is still the favourite for Indian consumers and today 90% of gold imports are routed through banks.  This year’s Akshaya Tritiya festival in India falls on May 13th.  It is the second-biggest gold buying festival after Dhanteras. The Indian Wedding season has just begun and will continue until July.

India’s Central Bank, The Reserve Bank of India, seeks to restrict bullion imports because of the strain it is putting on their current account deficit. India is the largest importer of gold and more than half of it is used for jewellery.

Gold in Chinese Yuan, 1 Year – (Bloomberg)

China looking to overtake India as the world’s largest consumer of the yellow metal imported a new record amount from Hong Kong this March. The amount was 223.52 tonnes which is over two times the previous record high of 114.4 tonnes recorded in December 2012.

The China Gold Association reported that gold consumption jumped 26 per cent to 320.54 tons in the first three months from a year earlier. The World Gold Council stated that Chinese consumption totalled 776.1 tons in 20912, down from 779.8 tons the previous year.

Gold imports by China from Hong Kong more than doubled to an all-time high in March as buyers underscored increased bullion demand in the world's second-largest economy. This demand was fuelled no doubt by the record fall in the gold price on April 12th.

Mainland buyers purchased 223,519 kilograms (223.52 metric tons), including scrap, compared with 97,106 kilograms in February, according to Hong Kong government data. If this buying trend continues the Chinese look set to break all previous gold consumption records.

We expect The World Gold Council’s Q1 demand report to confirm the strength of Chinese demand for gold bullion. 

NEWS

Gold extends losses; ETFs at 4-year low - Reuters

RBI curb on gold import likely to raise bullion prices – The Economic Times

Gold Imports by India Seen Topping 100 Tons for a Second Month - Bloomberg

Gold’s Biggest Drop in 30 Years Fails to Deter Advocates – Bloomberg

COMMENTARY

Suicide Sacrifice to God of Market – Max Keiser

Jeremy Grantham: "We Have Been Conned" – Zero Hedge

Gold Assets in Fund Paulson Holds at Lowest in Four Years - Bloomberg

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