India Extends Restrictions As Gold Imports Jump

India’s Gold Imports stood around 162 tonnes in May 2013 – a figure that was sharply higher than April (142.5 tonnes), even though it is below an estimate of 262 tonnes earlier in the day. April imports had shot up 138% from a year earlier to $7.5 billion, including small amounts of silver. Gold Imports have been much more than expected, making further measures from the government to curb demand in the world’s biggest bullion buyer almost mandatory. Indians have continued a buying spree that started in April, as consumers took advantage of a slide in global prices which coincided with regional festivals when gold is bought for gifts. With May Gold imports soaring even higher, the government is under pressure to look at more measures to rein them in. Such hefty imports threaten to widen a current account gap which already hit a record 6.7% GDP in the December quarter.

RBI imposes New Restrictions on Gold Imports:
On Tuesday, the RBI (Reserve Bank on India) extended the restrictions on Gold Imports on consignment basis by banks to all nominated agencies and trading houses. Gold Imports will now be allowed only for meeting exporters’ need of gold jewelry, the RBI said in a statement. On May 13, the RBI imposed the restriction on Gold Imports by banks on consignment basis. The RBI added that all letters of credit by the agencies for Gold Imports will be only on 100% cash margin basis, reported ET. All Gold Imports will necessarily have to be on “documents against payment” basis, not on “documents against acceptance” basis, the RBI said. On Sunday, the government raised the import tariff value of gold to $459 per 10 grams, while it has been slashed at $737 per kg for silver imports. India had hiked its import duty to 6% in January in an attempt to limit purchases and rein in a record high current account deficit. Gold is the second biggest import item after crude oil.

The measures helped reduce first quarter imports to 215 tonnes from 228 tonnes a year earlier, according to figures from the World Gold Council. But since then, domestic prices have dropped sharply, tracking global trends, and undermined further by a stronger Rupee. MCX Gold Futures on Mumbai’s Multi Commodity Exchange hit a year low of 25,720 Rupees per 10 grams on April 16. MCX Gold Futures were trading around 27,110 rupees on Monday – roughly equivalent to $1,351 per ounce – as global spot gold prices were quoted around $1,403 per ounce, reported Reuters. The Indian government is cautious about raising import duty further, as it is concerned that this could encourage smuggling.

WGC forecasts imports of about 615 tonnes in the first half of 2013 – implying June imports would have to retreat to more normal levels of about 80 tonnes. It expects second half demand to match 2012′s 485 tonnes – putting it on track for a record year.