23 January 2019
The upcoming start of India's wedding season is expected to drive consumption of the yellow metal. Photo: WSJ
The upcoming start of India's wedding season is expected to drive consumption of the yellow metal. Photo: WSJ

India gold buying seen picking up

India is expected to resume brisk gold buying after the government removed uncertainty over import taxes.

Traders are bracing for a short-term bump in gold demand in the world’s largest consumer of the precious metal, the Wall Street Journal reported Tuesday.

Last week, the government announced it will maintain import duties, lifting a cloud over the market.

The uncertainty had led some wholesalers to delay purchases, anticipating that the government would announce a cut in taxes on gold imports.

In January, imports came in at 39 metric tons, according to Macquarie Group Ltd.

The figure compares with a monthly average of 81 tons in the second half of 2014.

February data is not available but traders and analysts said imports remained subdued last month.

Many traders expect Indian demand for physical gold to pick up as buyers move forward with purchases that were postponed.

At the same time, the upcoming start of the wedding season will also drive consumption, they said.

“Everybody will start stocking up” following sluggish activity in January and February, said Gnanasekar Thiagarajan, director of Commtrendz Research, a commodity consulting firm based in Mumbai.

The outcome of India’s budget negotiations was disappointing for gold bulls hoping for a cut or elimination of the import duty, which would have lent more sustained support to prices, analysts said.

Expectations for higher benchmark interest rates in the United States have dimmed the allure of gold which offers no yield.

The prospect of higher rates has also lifted the dollar which has made gold relatively pricier for buyers using other currencies.

For now, rising Indian gold demand is in focus.

On Monday, Indian gold futures were trading about US$4 above the price for gold in the physical market for immediate delivery, Thiagarajan said.

This suggests that buyers are returning to the market, he said.

India was the world’s No. 1 gold buyer last year, with imports of 842.7 tons, according to the World Gold Council.

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