Prime Minister Narendra Modi’s government has had a “remarkably impressive” effect on consumer confidence in buying gold since it coming to power earlier this year, World Gold Council head of intelligence Alistair Hewitt said.
He expects this trend to continue given the improving Indian economy despite the Bharatiya Janata Party’s failure to lift restrictions aimed at curbing gold imports as had widely been expected, he told FastMarkets.
“One of the most striking features about the Indian gold market has been the economic confidence of Indian consumers,” Hewitt said. “[Indian buying] has been so important for the market for the last 20 years – I don’t see that changing any time soon.”
In data this week, Indian industrial output in September climbed to a to a three-month high of 2.5 percent, up from 0.5 percent in August and beating the forecast 0.6 percent.
The Organisation for Economic Co-operation and Development recently lowered its growth forecast for India to 5.4 percent from 5.7 percent for this year but it expects expansion of 6.4 percent next year, having pegged it at 5.9 percent just two months ago.
And the S&P BSE Sensex, a stock market index that tracks the performance of the 30 largest stocks on the Bombay Stock Exchange, has rallied by 30 percent since the start of the year.
Growing confidence in the country’s economic performance lifted Indian gold demand in the third quarter of this year 60 percent to 183 tonnes, the WGC said, although the year-ago figure may have been distorted by import restrictions and higher duties imposed by the government that discouraged buying.
Indeed, contrary to expectations, Modi has maintained India’s strict 10-percent import tariffs on gold as well as the rule that makes it mandatory for trading agencies to export 20 percent of imported goods.
This comes despite calls from some quarters on the Indian Finance Ministry to loosen the curbs, which New Delhi introduced to narrow the country’s ballooning current account deficit (CAD) – it hit $87.8 billion in the 2012-2013 fiscal year.
The CAD narrowed to $7.8 billion in the three months to June 30 from $21.8 billion a year previously, which the Reserve Bank of India attributed largely to a rise in the import duty to 10 percent and a rule requiring 20 percent of all bullion imports be re-exported.
But the festival-related surge in gold imports in September has pushed the country’s trade deficit out to $14.25 billion from $10.84 billion in August, making an easing or a withdrawal of the rules unlikely.
In contrast, China’s “pro-gold policies” are one of three factors supporting domestic demand for the metal alongside rising incomes and “the cultural significance of gold with Chinese people” Hewitt said.
Despite a 39-percent drop in jewellery sales in China in the third quarter of the year to 147 tonnes, Hewitt believes that confidence in buying at the consumer level is as strong as ever.
Year-on-year comparisons are complicated by last year’s “exceptional market”, he added, describing the surge in imports to a reported 1,108 tonnes as “a once-in-a-generation event”.
Still, he acknowledged the Chinese market is likely to remain well supplied after last year’s exceptional intake.
Chinese imports of gold from Hong Kong were a net 61.7 tonnes in September, more than double the total in the previous month and the highest since March, according to Hong Kong government figures.
Mainland China imported 25.6 tonnes in August but had brought in 109.4 tonnes in September 2013.
(Editing by Mark Shaw)
The post Modi effect on gold market ‘remarkably impressive’ – WGC’s Hewitt appeared first on The Bullion Desk.
No comments:
Post a Comment