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Indian jewellers to halt gold bar, coin sales to retail buyers

All India Gems & Jewellery Trade Federation will send notices to members asking them to halt sales until the deficit stabilizes
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First Published: Mon, Jun 24 2013. 08 35 PM IST
Finance minister P. Chidambaram on 13 June appealed to Indians to resist the temptation to buy gold for a year, saying reduced imports may help tackle the current account gap and the weakness in the rupee. Photo: AFP
Finance minister P. Chidambaram on 13 June appealed to Indians to resist the temptation to buy gold for a year, saying reduced imports may help tackle the current account gap and the weakness in the rupee. Photo: AFP
Mumbai: Gold jewellers and bullion dealers in India, the world’s largest consumer, will be asked to suspend sales of coins and bars to retail investors to support government efforts to narrow a record current-account deficit that’s pushed the currency to an all-time low.
“The All India Gems & Jewellery Trade Federation, a group that represents about 300,000 gold jewellers, manufacturers, wholesalers, retailers and distributors, will send notices to members asking them to halt sales until the deficit stabilizes,” chairman Haresh Soni said by phone from New Delhi. “The curbs may reduce demand by about 20% and will help trim the current-account shortfall,” he said.
A slump in gold prices in April led to a buying frenzy in the country, increasing concern that the $32.6 billion current-account deficit in the fourth quarter of 2012 will widen. The worsening deficit boosted pressure on the rupee, which weakened 9.2% against the dollar this quarter to tumble to a record last week. Finance minister P. Chidambaram on 13 June appealed to Indians to resist the temptation to buy gold for a year, saying reduced imports may help tackle the current account gap and the weakness in the rupee.
“As a responsible trade body, we understand the situation and we are going to request consumers that if you are thinking of investment, wait for sometime,” Soni said. “Our trade deficit can be reduced.”
Reliance Suspension
“Jewellers and traders will be allowed to sell coins and bars to manufacturers as they add value and provide employment to artisans,” he said. Reliance Capital Ltd., the financial services company owned by billionaire Anil Ambani, on 21 June stopped sales of gold in physical form and as an investment product to help cut India’s imports. It also stopped loans against gold and halted new subscriptions in its gold savings fund.
Imports were 117 metric tonnes in April after bullion entered a bear market, according to the jewellery federation. Purchases were estimated at 162 tonnes in May, according to the finance ministry. The shortfall in the current account, the broadest measure of trade, is the biggest risk to the $1.9 trillion economy, according to the Reserve Bank of India (RBI).
The government raised the import duty on gold to 8% from 6% on 5 June, a fourfold increase from January last year. The RBI has also placed restrictions on overseas purchases on a consignment basis and limited imports for local consumption against cash only.
Futures Tumble
Gold futures in India fell 3.1% last week as global prices dropped to the lowest since September 2010 on speculation that reduced monetary stimulus from the US Federal Reserve may spur a stronger dollar and erode demand for a store of value.
Gold for immediate delivery was 1.2% lower at $1,280.65 an ounce at 1:42 pm in Mumbai, down 24% this year. The August-delivery contract lost 1.3% to Rs26,680 per 10 grams on the Multi Commodity Exchange of India Ltd., extending losses to 17% this year.
“The decline in prices have failed to spur demand as customers advanced purchases in April and May,” Soni said. “Demand for bullion is typically low during June and July in the absence of weddings and festivals,” he said. Bloomberg
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First Published: Mon, Jun 24 2013. 08 35 PM IST
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