Gold imports by India, the world’s largest consumer, are set to exceed 100 metric tons for a second month in May as jewelers rush to beat central bank curbs on overseas bullion purchases by banks, a refiner said.
The biggest slump in gold prices in more than three decades on April 15 spurred banks, traders and jewelers to import more than 100 tons last month, said Rajesh Khosla, managing director of MMTC-PAMP India Pvt. Purchases this month will match April’s imports, he said. MMTC-PAMP’s refinery in northern Indian state of Haryana can process 100 tons of gold, 600 tons of silver and make 2.5 million pieces of coins a year, he said.
The Reserve Bank of India, or RBI, will issue guidelines by the end of this month to restrict banks from importing gold on a consignment basis as it seeks to reduce domestic demand and curb a record current-account deficit, the central bank said on May 3. Banks will be allowed to buy on a consignment basis to meet only genuine needs of exporters of jewelry. The bulk of the imports by banks now is on a consignment basis that doesn’t require them to fund the purchase, RBI said.
“The imports this month look as good as in April as everyone is trying to import as much as possible before the RBI guidelines are issued,” Khosla said in an interview in New Delhi yesterday. “The price looks good, let’s import,’ every jeweler seems to be saying. Time will tell whether they were right or not?”
Retail buyers flocked to jewelry stores and bank outlets in India to buy ornaments and coins after gold plummeted 14 percent in two sessions through April 15 in the worst slide since 1983, causing a shortage in supplies. The Reserve Bank has said the current-account shortfall, exacerbated by bullion imports, and consumer-price inflation above 10 percent are among risks that constrain room for further interest rate cuts to revive economic growth from the lowest in a decade.
“At current prices, it looks the imports will be more than last year,” said Khosla, whose refinery is a venture between state-owned MMTC Ltd. and PAMP SA of Switzerland. “If the central bank wants to restrict, imports will fall.”
India’s gold imports dropped 11 percent last year to 860 tons from a record 969 tons in 2011, the World Gold Council estimates. Demand for jewelry and investment fell to 864.2 tons in 2012, the second straight year of decline, it said.
“The net impact on Indian gold imports as a whole would very much depend on how quickly affected banks can adapt to the new requirements and the capability of others to fill any gaps this might create in the market,” UBS AG said in a report today. “The impact, if any, is expected to be transitory in any case, and overall import volumes would ultimately be determined by underlying demand.
India has tripled import taxes on gold from as low as 2 percent in January last year after the current-account deficit, the broadest measure of trade, widened and the rupee slumped to a record against the U.S. dollar. Finance Minister Palaniappan Chidambaram has blamed the deficit on a ‘‘passion’’ for gold, saying the gap is a greater concern than the worst budget deficit among the so-called BRIC nations. The deficit widened to $32.6 billion in the last quarter of 2012.
While bullion has rebounded from a two-year low of $1,321.95 an ounce on April 16, driven by coin and jewelry demand from the U.S. to China and India, it is 24 percent below the record $1,921.15 reached in 2011. Gold for immediate delivery was 1.1 percent higher at $1,468.45 an ounce at 5:57 p.m. in Mumbai.
‘‘The global price of gold seems to have stabilized at current levels,’’ Khosla said. ‘‘Further increase in the price depends on economic recovery in the U.S. and Europe.’’
Gold fell into a bear market in April as investors sold the metal in favor of riskier assets, spurred by expectations that the global economy was recovering. Holdings in the SPDR Gold Trust, the biggest bullion-backed exchange-traded product, fell 0.4 percent to 1,057.79 metric tons yesterday, the lowest level since March 2009, according to data compiled by Bloomberg.
Gold imports by China from Hong Kong more than doubled to a record in March as buyers in the biggest consumer after India boosted purchases. Mainland buyers purchased 223,519 kilograms (223.52 tons), including scrap, compared with 97,106 kilograms in February, Hong Kong government data showed yesterday.
Retail demand for gold in India was good ahead of the wedding season and the Akshaya Tritiya festival on May 13, Bachhraj Bamalwa, a director and former chairman of the All India Gems & Jewellery Trade Federation, said yesterday. Jewelers are paying between $10 an ounce and $12 an ounce over the London cash price to secure supplies, compared with $2 an ounce before the price slump, he said.
Akshaya Tritiya festival is considered by the country’s more than 900 million Hindus as the traditional day to buy precious metals. Bullion is bought during festivals and marriages as part of the bridal trousseau or gifted in the form of jewelry by relatives.
The appetite for gold continued to be ‘‘very strong’’ in India and an index of physical flows showed demand five times that of a 12-month average, UBS said on May 3. ‘‘Appetite is likely to hold up as we get closer to the Akshaya Tritiya festival,’’ it said.