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India's gold and silver imports are expected to have declined substantially to USD 2-2.5 billion in June following recent steps taken by the government as well as the RBI to curb imports of the yellow metal.
. These imports grew 89 per cent to USD 8.39 billion in May
The final figures for gold and silver imports will be released by the Commerce Ministry by the middle of this month.
I had the chance this morning to reconnect with Vishal Vyas, head of operations at India’s top bullion dealer, Pushpak Bullions Pvt. Ltd.
It was a sobering conversation, as Vishal indicated that the Indian government has just stepped in and crushed the domestic gold market with punitive taxation and trade controls. He also indicated that Dubai is now becoming a major recipient of “gold tourism”—with tourists flooding into the United Arab Emirates in order to buy gold.
Speaking to the recent steps taken by the Indian government to smash demand coming from the world’s largest gold market, Vishal said, “In India, due to the monetary policy and pressure from the finance ministry to control the current account deficit, the government is trying to curb the import of gold into India. They [just] increased customs duties by 2%, which is now at 8%. Apart from that, they have also banned the import of gold on a consignment basis—which was the normal practice worldwide to import gold.”
These new measures have crushed domestic Indian demand by about 86%. ...
Yip...
Expect places like UAE and India's neighboring countries to suddenly have HUGE increases in gold imports.
In an attempt to control revenue leakage and gold smuggling to India, Nepal has decided to closely monitor the import and distribution of gold. (09/06/2013)
The hub for bringing gold into India is Dubai, but gold can enter the country from other directions as well. "Illegal gold may enter through borders adjoining Bangladesh, Nepal, Pakistan and Shri Lanka," said Bachhraj Bamalva, director, GJF.
GFMS Thomson Reuters has estimated 102 tonnes of gold entered the country through unofficial routes last year. In the current year, smuggling is expected to be much higher.
RBI further tightens gold import rules to tame demand
The RBI asked all nominated banks and agencies to export at least one-fifth of every lot of imported gold in all forms, and locally make it available only for jewellers.
The central bank said banks need to retain 20 per cent of the imported gold in customs bonded warehouses, and will only be able to further import gold after exporting at least 75 per cent of the gold from those warehouses.
Last month, the RBI had ruled out any transactions for imports unless they were intended to make jewellery for export, as it looks to rein in a record current account deficit.
80% dip in gold imports linked to rampant smuggling
Financial intelligence agencies are alarmed by the steep and sudden fall in gold imports recorded for June, suggesting large-scale smuggling of the yellow metal since import duty was increased from 6% to 8%
"Though curbs on sale of gold bars and coins and increased duty have brought the demand down a bit but not more than 20%-30% on an average. But imports have dropped by 80%. This simply means the rest is being smuggled," said a senior officer from Directorate of Revenue Intelligence (DRI).
Gold Smuggling Takes Off in India
The value of the gold seized during the quarter was 270 million rupees, more than 10 times the 25 million rupees of precious metal retrieved from smugglers during the same period in 2012, said the official. The total number of cases of smuggled gold during the same period shot up to 205 from 21 a year earlier, said an official at the Antismuggling Department. "I think we are able to detect only about 5% to 10% of the gold smuggling in the country." "It is mostly coming from Dubai but also from Bangkok and Singapore." The official said some of the gold comes by sea, but it also us being smuggled across land borders with Bangladesh and Nepal.
Kothari, or PK, as he is known in Zaveri Bazaar, has revved up a cumulative turnover of Rs1.2 lakh crore over the past six years, earning the title of India's 'bullion king'.
An intimidating force of about 100 income-tax officials raided RSBL's (his) offices last month.
Kothari claims. "I will shut down all my trade if the I-T department finds a single bogus entry in RSBL's accounts," dares Kothari.
Gold premiums in India double as supplies decline on curbs
“The fees paid by jewellers to banks and other importers climbed to about $10 an ounce over the London cash price from as low as $4 an ounce a week earlier,” said Haresh Soni, chairman of the All India Gems and Jewellery Trade Federation
That's still a cheaper premium than what folks are paying in Hong Kong isn't it?
Premiums jumped to $25-30 an ounce on London prices as against $20 an ounce last week, said Bachhraj Bamalwa, a director at the All India Gems and Jewellery Trade Federation, adding "there is massive shortage of gold due to restrictions."
ISLAMABAD:
In an attempt to address steep devaluation of the rupee against the dollar, Pakistan on Tuesday temporarily banned import of gold to save the precious foreign currency reserves.
The finance ministry lifted the import tax on gold to 10% from 8%. The tax on silver was also raised to 10%, from 6%. India is the world's biggest gold consumer and a leading market for silver.
India and Indonesia appeared trapped in a race to the bottom on Monday, as both the rupee and the rupiah fell sharply against the US dollar, prompting a selloff in equities.
The Indian rupee continued its relentless decline, hitting the latest in a series of all-time lows against the US dollar and dashing hopes the government had succeeded in calming the country's unsettled financial markets.
...
The Indian rupee has now overtaken the Australian dollar and the Japanese yen to become Asia’s worst performing currency this year, having fallen 12 per cent against the US dollar. Globally, only the Brazilian real and the South African rand have recorded bigger declines.
...
Over the weekend a range of senior figures including Prime Minister Manmohan Singh tried to calm investor fears that the country's mixture of weakening growth and an unsustainable current account gap was pushing India’s economy towards a crisis point.
Notably, officials ruled out capital controls on foreign investors, following a series of limited regulations restricting movement of funds for domestic institutions that alarmed markets last week, amid concerns that larger foreign "long only" funds might soon begin to remove money from India.
...
"This turbulence will continue in the short run, but Friday's mayhem was really triggered by the fear that the RBI would do more in the way of capital controls," said Shubhada Rao, chief economist at Yes Bank in Mumbai. "I think that was overdone ... but the problem is that while India is trying to mend its current account problem this will take time, while the markets are reacting to overnight news."
Jan 21 - The government raises gold import duty by 2 percent to 6 percent.
Jan 22 - The government more than doubles duty on raw gold to 5 percent.
Jan 30 - Finance Minister P. Chidambaram says no plans for additional taxes or curbs on gold imports.
Feb 1 - The RBI plans to introduce three to four gold-linked products in the next few months.
Feb 6 - The RBI says it would consider imposing value and quantity restrictions on gold imports by banks.
Feb 14 - The central bank relaxes rules on gold deposit schemes offered by banks by allowing lenders to offer the products with shorter maturities.
Feb 20 - Trade ministry recommends suspending cheaper gold jewellery imports from Thailand.
Feb 28 - India keeps its gold import duty unchanged in its annual national budget, defying industry expectations.
Feb 28 - India proposes a transaction tax of 0.01 percent on non-agricultural futures contracts including precious metals.
March 1 - Finance minister appeals to people not to buy so much gold.
March 18 - The Reserve Bank of India says it is examining banks that sell gold coins and wealth management products to identify "systemic issues", with a view to closing any legal loopholes.
April 2 - Finance Minister suggests unlikely to raise the import tax on gold further to avoid smuggling and would instead introduce inflation-indexed instruments.
May 3 - The RBI restricts the import of gold on a consignment basis by banks.
June 3 - Finance minister says India cannot afford high levels of gold imports and may review its import policy.
June 5 - India hikes gold import duty by a third to 8 percent.
June 21 - Reliance Capital (RLCP.NS) halts gold sales and investments in its gold-backed funds.
June 24 - India's biggest jewellers' association asks members to stop selling gold bars and coins, about 35 percent of their business.
July 10 - India's jewellers could continue a voluntary ban on sales of gold coins and bars for six months.
July 22 - The RBI moves to tighten gold imports again, making them dependent on export volumes, but offers relief to domestic sellers by lifting restrictions on credit deals.
July 31 - India hopes to contain gold imports well below 845 tonnes that were shipped last year, Finance Minister says.
Aug 13 - India hikes import duty on gold for a third time in 2013 to 10 percent. Duties for silver and platinum also increased to 10 percent. Customs duty on gold dore bars, ore or concentrate increased to 8 percent from 6 percent.
Aug 14 - India turns the screws on gold buying again, banning imports of coins and medallions and making domestic buyers pay cash.
I had the chance this week to reconnect with Vishal Vyas, head of operations at India’s top bullion dealer, Pushpak Bullions Pvt. Ltd.
It was a powerful conversation, as Vishal indicated that the Indian Government and Central Bank is stepping up its fight against gold, with punitive taxation and trade controls. As a result he added, gold is now trading at elevated levels of $1800 oz. within the country. Despite these changes however, Indian families are still buying gold in “small quantities every month”.
...
Citizens of India have been watching, in stunned amazement, as over the past month the local currency has lost an unprecedented 15% of its value, with a record plunge taking place just last night. And, as so often happens, the population habituated to a government "acting in its best interests" is asking itself - how could we have possibly known this was coming. The answer, as usually happens, was staring everyone right in the face.
As Grant Williams shows in his latest "Things That Make You Go Hmm", the warnings came loud and clear, and were very explicit in the form of not one, not two, not ten, but many more sequentially imposed and escalating forms of capital controls by the Indian central bank that sought to prevent the conversion of paper into hard currency. Gold. (Which also overnight hit a record high in rupee terms).
...
Indian gold buyers rush to order now import rules are clear
Wed Sep 4, 2013 6:57pm IST
By Siddesh Mayenkar
MUMBAI, Sept 4 (Reuters) - India's gold buyers lined up to
restart imports on Wednesday as the customs department clarified
new rules, putting the world's biggest bullion buyer back in the
market after a six-week gap and threatening government efforts
to underpin the rupee.
About a quarter of a tonne of gold waiting at Mumbai airport
should head to India's biggest gold market, Zaveri Bazaar, where
sales are nearly $10 million a day, and jewellers said they
would place fresh import orders as early as Thursday.
"Around 250 kg of gold, which is stuck at the airport, will
get released after the order. New shipments could start within
the next 2-3 days," said Bachhraj Bamalwa, director at the All
India Gems and Jewellery Trade Federation.
India's central bank, in a bid to help the government stem
the tide of gold imports which had pushed the current account
deficit to a record high, told importers on July 22 that a fifth
of their purchases would have to be turned around for export.
But the rule's sketchy details caused buyers to hold off and
instead use stocks that had piled up in April and May when
record imports of 304 tonnes provoked the government into hiking
duty to an all-time high of 10 percent.
On Wednesday, the Indian customs department issued its
guidelines on how the central bank's call for gold imports to be
split 80 percent for domestic use and 20 percent for export
would be monitored.
ORDERING TOMORROW
The move aims to boost exports but could also rein in
imports to around 30 tonnes a month - about half average volume
- and keep India on track to meet the government's target of 845
tonnes in the 2012/13 fiscal year.
But domestic buying could surge later this year as a better
than expected monsoon is expected to increase disposable incomes
of farmers in rural areas, who make up about 60 percent of
Indian gold demand.
"My export orders are pending since last month, I'll request
my bank to place an order for 20 kg tomorrow morning," said
Kumar Jain, proprietor of Umed Exports, which ships jewellery to
the United States, Europe and the Middle East.
In a more than 40-clause document, the customs department
laid out details on authorised importers, bonds to be given by
importers over duty payments and "surprise audit or checks" by
custom officers to ensure compliance.
And in a clause that may cause problems it said importers
would not be able to make a third order until they had evidence
of payment to exporters in the form of an inward remittance
certificate, which can take nine months.
"This will make our life difficult at the time of the third
import," said Pankaj Kumar Parekh, vice-chairman of the Gems and
Jewellery Export Promotion Council (GJEPC).
Imports by special economic zones, which export about 20-30
tonnes a year, will not be included in the import restrictions.
Domestic jewellery exports outside these areas are about 60-70
tonnes a year.
A battle appears to be brewing between the Indian government and the Department of Posts, which has floated a tender for the sale of gold coins through some 1,000 post offices.
With the Indian government taking strong measures to discourage gold consumption, the tender by the Department of Posts has also brought on howls of protest by political parties.
Sudhakar Reddy of the Communist Party of India, has questioned the tender in a missive to the Prime Minister. Does the right hand know what the left hand is doing? he has asked.
The Current Account Deficit (CAD) has widened to 4.9% in the quarter ending June for India. "It is a well known fact that such a high CAD has made our country vulnerable with the rupee weakening to abnormal levels. Consequently, the common man has to take the brunt with high inflation and spiralling fuel prices," Reddy said.
Arguing against the tender, Reddy has asked how could one arm of the government go against the government's explicit intention of curtailing gold coin sales.
"The huge surge of gold demands, especially those sold by banks, has played a huge role in the ballooning of the CAD. This has been admitted earlier by the government itself. However, it has been observed that both public sector units and private banks are still randomly and openly selling gold coins across the counter. This is in direct contravention of the government claims on the advisory about gold coins," he added.
...
...
"Gold and narcotics operate as two different syndicates but gold smuggling has become more profitable and fashionable," said Kiran Kumar Karlapu, an official at Mumbai's Air Intelligence Unit.
"There has been a several-fold increase in gold smuggling this year after restrictions from the government, which has left narcotics behind."
...
That suggests official data showing a sharp fall in gold buying, which has helped narrow India's current account gap, may significantly underestimate the real level of gold flows.
...
Almost Every Passenger On A Flight From Dubai To India Was Found Carrying 1 Kilo Of Gold
Faced with curbs on gold imports and crash in international prices leaving it cheaper in other countries, gold houses and smugglers are turning to NRIs to bring in the yellow metal legally after paying duty. Any NRI, who has stayed abroad for more than six months, is allowed to bring in 1kg gold.
It was evident last week when almost every passenger on a flight from Dubai to Calicut was found carrying 1kg of gold, totalling up to 80kg (worth about Rs 24 crore).
We soon got information that two smugglers in Dubai and their links in Calicut were behind this operation, offering free tickets to several passengers.
Pakistan has noticed the surge in smuggling, concerned at a steep increase in import duties on gold in a "neighboring country," and has imposed a 30-day ban on gold imports to curb the 'trade'.
http://www.zerohedge.com/news/2014-...-imports-stall-steep-increase-smuggling-india
Pakistan Enforces 30-Day Ban On Gold Imports To Stall "Steep Increase" In Smuggling To India
Definitely 'feels like' events are speeding up now again in the gold market, will have to see how it all plays out...
The decision by the Reserve Bank of India (RBI) to grant gold import license to five private sector banks saw gold premiums tumbling by nearly 70% during last week.
...
The world’s largest elections have begun in India. Industry sources believe that the new government which comes to power post general elections will act swiftly to lift the curbs on gold imports. The ruling party in India has already stated that revision of gold import norms will be taken up following the elections. Also, the main opposition party in India has also announced that any action on gold should look at the interests of the public and traders, not just economics and policy.
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