Tuesday, 25 October 2016

Gold Update - India's Gold Industry Struggling

Price Premium Returns for Diwali But India's Gold Industry Struggling
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GOLD PRICES in India, the world's largest private holder of the metal, have finally returned to a small premium above global quotes, but the subcontinent's bullion and jewelry industry continues to struggle with over supply and weak demand. 

India has zero domestic mine output, but exports of bullion are banned. So there was no outlet for a glut of metal built as 2016 began with the introduction of new tax rules directly affecting the gold industry, leading domestic prices in the world's No.2 annual consumer – now behind China – to trade below global quotes almost all year, a reverse of the more typical premium which incentivizes new imports.  

Discounts ran to record levels according to media reports, down as deep as $100 per ounce beneath international quotes in July, when global gold prices peaked at $1375 after the UK's Brexit referendum to quit the European Union. 

India's gold demand is claiming a "declining share of wallet" said Sunil Kashyap, managing director of global banking and markets at bullion market-maker Scotiabank, and chairman of the Singapore Bullion Market Association, at last week's London Bullion Market Association conference in Singapore. "Gold has become less and less relevant," he concluded, but while its "share of wallet is reduced, that wallet has grown, so demand overall is constant."


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