India's physical gold demand may pick up during Apr festival season: Barclays
London (Mar 23) Physical gold demand in India is set to pick up on the back of festival related buying ahead of Akshaya Tritiya, which falls April 21, Barclays said Monday.
So far in 2015, Platts has reported subdued buying activity in India, with discounts seen at the start of the year moving into a modest premium in late January.
On Friday, Platts Gold Premium 995 India was assessed at $1.25/oz, down $1/oz from Thursday.
No physical deals were confirmed in any locations.
However, the overriding number given by a variety of bankers, traders, dealers, jewelers and refiners came in at $1.25/oz.
Bids/offers were heard between minus $1/troy ounce and plus $2/tr oz. Premiums paid by jewelers were heard at $3.50/tr oz.
The premium picks up around 50 cents as it moves further down the chain to the consumer from the importer, owing to the size of material purchased.
Barclays said that February's gold imports were low "as the market anticipated an import duty cut, but they have surged in March as stocks have run low."
In February, India imported 35 mt of gold.
A source told Platts that in the first 10 days of March, 25 mt had already been imported into the country.
"Yes, imports are picking up, but in the last few days we have seen a slowdown in sales," said the source.
One issue for the official gold market is the black market trade.
"Gold smuggling remains rife and India has cracked down on this activity, with the number of seizures reported as having risen to 3,412 for the first 10 months of the 2014-15 fiscal year, versus 2,450 for the previous year," said Barclays analyst Suki Cooper.
"This translates into around 4 mt -- or $150 million -- worth of gold seized, up from $110 million in 2013-14 and $7 million in 2011-12. Demand, coupled with the high import duty, has seen a pickup in unofficial trade," said Cooper.
This sentiment was echoed by the Indian gold sector.
Most are demanding a cut in the current 10% import tax.
Many had expected a change in policy in the national budget presented in parliament on February 28, a cut of between 2% and 4%, but the government maintained its stance and kept the duty unchanged.
The Indian government has been following a hardline against the gold industry for the past few years in an attempt to fill a hole in its current account deficit.
Looking at China, Cooper said that demand has only been modestly responsive to lower prices.
"The monthly rolling average of volume traded on the Shanghai Gold Exchange has firmed to levels seen in mid-February as local prices have fallen towards Yuan 230/g [$37.47/g], but we haven't seen a sharp pickup in demand," the analyst said.
China is steadily opening its gold market to the international community.
India and China are the world's top two gold consuming nations.
India is the world's largest importer while China is the world's biggest producer.
The international dollar gold price spiked last week on the back of the US Federal Reserve's interest rate statement.
It had been trading around $1,150/oz and is currently bid around $1,180/oz for spot material.
The metal had hit an intraday, year-to-date high of $1,307.98/oz January 22.
However, most market observers said they expected a correction toward $1,100/oz.