Indian Gold Imports Down 60% Through August

August 2016 Indian Gold Imports Rise off July’s Multi-Year Monthly Low Level.

Gold Imports Remain Under Pressure From a Nationwide Jeweler Strike, Increased Duties, Taxes and Government Intervention.

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Indian Gold Imports January – August 2016

Indian gold imports were 25 tons (approximately 882,000 ounces) in August up from just 20 tons (approx. 705,500 ounces) in July.

Last year we released a survey of India and Gold that covered supply and demand in that country and India’s historical affinity for gold. Indians love gold but their government hates that they love it.

India’s War on Gold

Indian gold imports have fallen sharply in 2016. Higher gold prices and the Indian government’s anti-gold policies are to blame for the reduction in Indian gold imports, which are a proxy for Indian gold demand as India does not have any significant domestic gold mining output. Business Standard reported earlier this week:

“Since February, gold has been quoted at a discount due to low demand and high prices”

According to Indian Ministry of Commerce and Industry, gold imports to India were just 34 tons in February, the lowest amount since December 2014. Gold imports fell to 24.1 tons in March the lowest since September 2013. Gold imports rose to 31 tons in April but were about 50 tons lower than last April. The Indian Ministry of Commerce and Industry has not updated their import figures since releasing April numbers. According to GFMS Thomson Reuters, industry estimates show that Indian gold imports from May through August remain at low levels (see charts below).

As a resut of the Indian government actions outlined below, Indian gold imports have fallen approximately 60% through August compared to the first eight months of 2015.

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Indian Annual Gold Imports 2008 – 2016

Indian Gold Imports 2008-2016 through august

Indian government action has slowed gold imports are are down 60% year over year.

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Indian Monthly Gold Imports 2014 – 2016

indian monthyly gold imports 2014 - 2016 through august

While Indian gold imports rose month over month in August, they are down significantly from last year.

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Import Duties

A ten percent duty on gold since 2013

Despite increased demand, Indian gold imports have been hampered by government action. India has placed import duties on gold in order to slow the amount of gold coming into the country. The government’s stated reason for curbing gold imports is that it throws off their balance of trade with imports exceeding exports due to large gold imports.

India has no significant gold mines, so the country’s entire gold demand has to be met either from gold already in the country or by imports. Efforts to get India’s gold mining industry going have met with lots of red tape and very little production. An Australian Indian venture was recently announced that aims to restart an old gold mine that might provide India with a few tons of domestic supply.

Gold Monetization Scheme

The government hopes not only to stop gold from coming into India, but to get Indians to turn their gold in to the goverment in exchange for interest bearing bonds. The scheme launched in late 2015 so far has yielded little gold from Indian citizens. A couple of temples in India have, however, agreed to turn some of their gold in for the interest bearing bonds. For more on India’s gold monetization scheme click here.

Sales Tax

Earlier this year the Indian government imposed a 1% sales tax on gold that immediately prompted jewelers across the country to go on strike. As of mid April, half of India’s jewerly stores were closed even though the strike was called off. The Indian government has refused thus far to lift the 1% tax. Rather, earlier this month, the Indian government exempted smaller jewelers from the 1% tax.

Additional Duty on Indians Returning From Abroad

In April 2016, the Indian government imposed an additional 15% duty on gold and silver for Indians returning home after one year abroad.

India’s Foreign Reserves

India’s foreign reserves have grown in recent years and reached an all time high of nearly $360 billion as of April 2016, or about the size of Russia’s foreign reserves.

India’s Gold Reserves

As of April 1, 2016, India’s gold holdings were 5.5% of its total foreign exchange reserves, down from 9.2% in September 2011. The percentage decrease is due in part to the increase in India’s overall reserves, the decline in the price of gold and because India has not added any gold to its reserves in recent years. India holds 557 tons of gold as reserves. Russia, in contrast, with overall foreign reserves about the same size as India’s, holds nearly three times that amount.

The Indian gold import charts are derived from data pulled from the Indian Ministry of Commerce and Industry, Govt. of India by Nick Laird of Sharelynx and are updated monthly and archived on Indian gold import data for May- August 2016 is from GFMS Thomson Reuters.

Click to see an overview of India and Silver and a 2016 update

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