Gold imports by India, the world’s biggest consumer last year, may tumble in the second half as the government curbs shipments to contain a record current-account deficit and stem a slide in the currency.
Inbound shipments may drop 22 percent to 372.5 metric tons in the six months through December from 478 tons a year earlier, according to a median of estimates from 10 importers, jewelers, analysts and trade groups compiled by Bloomberg.
That may still boost full-year imports to about 902 tons from 860 tons in 2012, according to Bloomberg calculations based on data from the World Gold Council and the All India Gem & Jewellery Trade Federation.
Falling Indian demand for physical gold may deepen a bear market in bullion as some investors sell the metal amid signs of an improving U.S. economy. Shoppers from India to China and Turkey crowded retail outlets to buy jewelry, coins and bars in April after the precious metal posted the biggest two-day loss in three decades. Goldman Sachs Group Inc. says that gold will reach $1,050 by the end of 2014, while Credit Suisse Group AG forecasts $1,150 in about a year.
“I see no reason to buy more gold,” said Bharti Chandra, a 38-year-old housewife, dressed in a salwar, who was selling an old necklace in Mumbai’s Zaveri Bazaar, the largest bullion market in the country. “I wanted to buy new gold for the festival season. So I am selling the old one.”
Doubling Tax
India doubled a tax on gold imports to 8 percent this year and tightened financing to cut purchases and contain the deficit. Finance Minister Palaniappan Chidambaram yesterday appealed to Indians to moderate demand for the metal, while ruling out a complete ban on imports.
The currency touched a record low of 61.2125 per dollar on July 8. The Reserve Bank of India raised two interest rates on July 15 to help quell speculation and defend the rupee.
The jewelry federation, a group that represents about 300,000 jewelers, manufacturers, wholesalers, retailers and distributors, has asked members to halt coin and bar sales until the deficit stabilizes. The move may cut demand by 20 percent, according to the group.
Consumption in India, which imports almost all the bullion it needs, accounted for 20 percent of global demand in 2012, according to data from the World Gold Council.
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