India’s Gold Demand Slows to a Trickle on Tighter Trade Rules

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Or sign-in if you have an account.(Bloomberg) — India’s gold imports are slowing to a trickle as banks and bullion traders grapple with new restrictions aimed at shoring up a weak rupee battered by the Middle East war. THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountAn increased import duty and a curb on volumes have strained gold flows into the world’s second biggest bullion consumer. Domestic prices do not currently reflect the additional costs as some speculators offload their existing stockpiles into the marketplace. However, immediate demand is likely to stay low, according to analysts and traders.The duty increase dwarfs a 4 to 6% increase in local prices. That means it is not currently viable to import and sell — though the gap between the import cost and local prices will reduce over time, said Sunil Kashyap, managing director of FinMet Pte Ltd.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againIndia, the world’s third-largest oil importer, more than doubled gold and silver tariffs to 15% on Wednesday, as part of a swathe of austerity measures to cushion the economy from the inflationary shock caused by energy disruptions in the Persian Gulf.The nation further tightened rules on Thursday, requiring bullion imports by jewelers and manufacturers under tax-exempted status to be capped to a maximum of 100 kilograms per license. Subsequent imports would be issued only after 50% is exported.Six traders and dealers told Bloomberg that they are either pausing imports or not receiving fresh orders. They asked to remain anonymous as they are not authorized to speak to the media.A spokesperson for the trade ministry did not immediately reply to a request for comment.While banks are still able to import gold, the volume depends on the end-customer demand, which is subdued, said Kashyap. Investment demand, digital gold, and ETFs will absorb displaced physical volumes, maintaining India’s aggregate gold consumption trajectory above 700 tons annually, according to Renisha Chainani, head of research at Mumbai-based gold trading platform Augmont Enterprises Ltd. The curbs followed weeks-long import delays for banks and refineries due to administrative bottlenecks. Then came Prime Minister Narendra Modi’s patriotic plea to Indians to avoid buying gold, as well as save fuel by cutting unnecessary travel and working from home.India meets almost of all its gold demand through imports, with 710 tons coming in last year. Bullion is one of the biggest imported items into India, and is central to the country’s economic and cultural life. Many Indians favor it for savings, and it’s seen as an auspicious purchase for weddings and during festivals. 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