04 Sep 2013 Last updated at 09:07:12 GMT : GJF
MUMBAI (Scrap Monster) : The All India Gems and Jewellery Trade Federation (GJF) forecasts a sharp rise in gold import premiums during the forthcoming months. The trade body believes that the country’s passion for gold may push imports of gold through unofficial channels. Recycled gold may also help to cover some demand. But such supply sources may prove inadequate to meet the unwarranted demand in the next few months. GJF anticipates the fees paid by jewellers to banks and other importers to rise by atleast 40% to 50% during the period.
According to GJF, there are several factors which make them judge higher gold premiums in the months to come. Firstly, supply of the yellow metal through official channels has dried up in the recent months following tight curbs on imports by the country’s central bank. The trade body suggests that imports have failed to pick up even after the customs authorities issued detailed clarification regarding the working of the 80:20 import rules.
The demand for gold is poised to rise in the lead-up to the wedding season. The demand is expected to go through the roof with better than expected monsoon promising a boost to rural incomes. The rural population who are not bothered by sporadic price hikes and drops of gold are habituated to long term investment of a portion of their agricultural income into gold every year. Added to this are festivals such as Diwali that come up in November. The people in India consider such festivals as most auspicious occasions for buying gold. The jewellers in the country are expecting higher sales during the festive season this year.
The shortage of gold in local market and the anticipated excessive demand for gold during festive season may push gold premiums to the peak. According to Bachhraj Bamalwa, Director, GJF, the gold premiums which are currently in the $35-40 range could swell to $-50-60 range by November end.
Author: Paul Ploumis