India Imported 33% More Gold in January to Beat Tax, Group SaysSwansy Afonso
Gold imports by India, the world’s biggest buyer, probably jumped 33 percent in January as traders and jewelers rushed to stockpile before the government increased taxes to curb a record current-account deficit.
Overseas purchases may total 75 metric tons to 80 tons this month compared with 60 tons a year earlier, with bulk of the imports being made in the first three weeks, Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade Federation, said by phone. Domestic demand, which has weakened in the past week, may improve in February because of marriages, he said.
India raised the duty on gold and platinum imports to 6 percent from 4 percent on Jan. 21 to reduce current-account deficit and moderate demand for the precious metal that’s rallied for 12 straight years. Higher taxes may cut demand, trimming imports to as low as 750 tons in the financial year starting April 1 from 855 tons estimated for this year, Nomura Holdings Inc. said Jan. 22.
“People imported more gold in the first week of January in anticipation of the tax,” Bamalwa said. “Imports weakened after the tax was announced and demand is yet to pick up.”
Standard Chartered Plc said earlier this month that its gold shipments to India soared on mounting concern the duty would be raised. Physical gold demand has been unusually strong for this time of year, with “good buying” from Southeast Asia, Standard Bank Plc said on Jan. 22.
Buying gold is considered auspicious in India during religious festivals and weddings. The festivals start in August and end in November, and are followed by the wedding season.
Gold for immediate delivery was little changed at $1,659.62 an ounce at 1:41 p.m. in Mumbai. Prices rose 7.1 percent last year, the smallest annual gain since 2008.
India’s current-account deficit widened to $22.3 billion in the three months to Sept. 30 as a faltering global economy hurt exports, the central bank said Dec. 31. About 80 percent of India’s current-account deficit, the broadest measure of trade, tracking goods, services and investment income, is due to gold imports, according to the Reserve Bank of India.
The rupee fell to a record low of 57.3275 against the dollar last year as bullion imports widened the current-account gap. Bullion in Mumbai surged to a record 32,464 rupees ($603) per 10 grams (0.35 ounce) on Nov. 26 and gained 13 percent last year. The contract for February was little changed at 30,359 rupees on the Multi Commodity Exchange of India Ltd.