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Gold imports by India seen climbing as RBI eases some curbs

LiveMint logoLiveMint 22-05-2014 Swansy Afonso

Gold imports by India, the world’s second-biggest user, will probably rise after the Reserve Bank of India (RBI) allowed more companies to buy the metal from overseas.

“Inbound shipments may expand by 10 metric tonnes to 15 tonnes a month, increasing domestic supplies,” Bachhraj Bamalwa, a director with the All India Gems and Jewellery Trade Federation, said by phone, without giving monthly totals.

The victory by Narendra Modi in national elections, the stronger rupee and narrowing of the current account deficit spurred speculation that controls may be eased. The government still levies a 10% import duty and requires importers to supply 20% of bullion to jewellers for export. Higher deliveries may lower costs at Titan Co. Ltd and Gitanjali Gems Ltd before the festival months from August to October.

“Supply will increase, bringing down the prices and premiums in the local markets and we will see demand improving,” Bamalwa said. “The fees that jewellers pay importing banks and dealers may drop to $40-$50 an ounce over the London cash price from $90 in the next 15 days,” he said from Kolkata.

Importers sell the remaining 80% to the domestic market and need to wait until the 20% share is exported as jewellery before shipping in the next consignment.

The central bank allowed star and premier trading companies approved by the Directorate General of Foreign Trade to import gold under the 20:80 rule, it said on Wednesday. “The RBI also eased some financing rules allowing banks to give gold metal loans to jewellers. There are five to seven trading companies that may start importing gold within 10 days,” Bamalwa said.

Gitanjali gems

Gold for immediate delivery climbed 0.2% to $1,295.12 an ounce at 3:44pm in Singapore. Futures on the Multi Commodity Exchange of India Ltd fell 0.3% to 27,285 rupees per 10 grams after dropping 2.9% on Wednesday to the lowest close for the most-active contract since July.

Gitanjali Gems jumped as much as 19% to `109 in Mumbai as Titan climbed 14% to `353.10 and Tribhovandas Bhimji Zaveri Ltd surged 20%.

The jewellery companies will benefit as their working capital will be better, interest costs will be reduced, and their liquidity levels will improve, Harish Galipelli, head of commodities and currencies at JRG Wealth Management, said by phone from Hyderabad. Slowly people will return to gold as a form of investment as we see further easing in curbs.

Demand climbing

Gold consumption will probably increase in the second half as the new government relaxes import curbs, the World Gold Council said 20 May. Demand may climb as high as 1,000 tonnes this year, said Somasundaram P.R., the managing director for India. That compares with 974.8 tonnes in 2013, council data showed.

The Bharatiya Janata Party, led by Modi, secured a majority of 282 seats in the elections, the biggest victory for a single party since 1984, enabling it to pursue an agenda without being constrained by coalition politics, results showed last week. Modi will be sworn in as Prime Minister on 26 May.

Imports fell after the government increased the import tax three times last year and introduced rules to cut a record current-account deficit and reverse a slump in the rupee.

Shipments dropped to 129 tonnes in the first quarter, WGC data show. Demand fell 26% to 190.3 tonnes with consumption of bars and coins tumbling 54% to 44.7 tonnes and sales of jewellery sliding 9% to 145.6 tonnes. Bloomberg

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