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India eases gold price curbs; also abolish import duty? |
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The Indian government removed restrictions on gold imports on Friday in what analysts termed as a surprise move, abolishing the 80:20 import rule. The surprise element stems from the fact that several analysts had expected the rules to be further tightened instead of being relaxed.
According to the rule, the government of one of the world’s largest gold consumers had in August 2013 mandated that 20 per cent of all imported gold had to be mandatorily exported before any new shipments could be brought in. In addition, only government-owned firms and banks were allowed to import the metal.
This was seen as acting as a dampener on the gold demand by local Indian jewellers, who said they had to import gold to meet local demand. In addition, allegations had recently surfaced that the 80:20 rule was being misused by half a dozen private companies that were allowed to import gold in May 2014.
The move is expected to cut smuggling and raise legal shipments into the world’s second-biggest consumer of the yellow metal after China, but the continuation of the recently imposed 10 per cent duty on gold imports will continue to keep the lid on Indian demand for gold, experts believe.
The rebate to a handful of firms led to a massive 280 per cent surge in gold imports into the country in October 2014, compared to the same month in 2013, suggesting that something was amiss.
“It has been decided by the Government of India to withdraw the 20:80 scheme and restrictions placed on import of gold. Accordingly, all instructions issued about the scheme from time to time starting with A.P. (DIR Series) Circular No. 25 dated August 14, 2013, stand withdrawn with immediate effect,” the country’s Reserve Bank of India said in a notification issued on Friday, November 28, 2014.
Even as the news of the scrapping of the 20:80 rule is bullish for bullion, the metal slumped almost 2.5 per cent on Friday amid a global rout in commodities as Opec reinstated its decision to not undertake any production cuts despite the oil price slumping to multi-year lows.
Spot gold price slumped to $1,166.70 per troy ounce on Friday, down 2.5 per cent from the previous day’s close at $1,196.60. The yellow metal is now trading at a 9-month low, at levels seen around early February this year.
Gold lost 28.3 per cent of its value in 2013, its first annual decline in more than a decade, suggesting an end to the golden era for gold that saw the metal surge more than 20 per cent every year in five of the six years between 2005 and 2010, rising the most in 2007 (30.9 per cent).
The metal is currently down 2.3 per cent year-to-date in 2014.
Source : emirates247.com
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