Gold premiums in Mumbai have dropped after the start of the Indian wedding season but November imports could well exceed 100 tonnes for the third month running, according to early indications.
Spot gold has staged a small recovery in recent sessions and physical demand in Asia is showing signs of improvement, despite premiums in India falling after buying for the annual wedding season died down.
Spot rates in Mumbai have fallen to $10-15 over spot for 1kg bars, sources said, from $18-$20 a week ago, although a handful of deals are being secured as high as $18 in some areas.
“The majority of gold purchases [for] the Indian wedding season have already been done ahead of the first wedding on November 22,” Metals Focus’ Chirag Sheth told FastMarkets. “Most people buy up their gold for weddings at least a month before.”
Imports in November could be far higher than this year’s monthly average – imports in the first half of November were around 102 tonnes, Commerzbank said on Wednesday, citing reports from the Indian media. The country imported around 150 tonnes in October.
High imports could also reflect buying ahead of a possible tightening of import restrictions by Reserve Bank of India (RBI) to tackle the country’s ballooning current account deficit (CAD).
“People are both panicking and confused – they know that it is coming but they don’t know when,” one source told FastMarkets. “They see this as an opportunity to oversupply themselves ahead of the pick-up in demand in January and February.”
An announcement on changes to legislation could come as soon as next week, another source close to the matter said, although the RBI might first wait until import numbers for the whole of November are available.
As well, the country is in no rush to implement any new rules while both Prime Minister Narendra Modi and RBI governor SS Mundra are out of the country and the slump in oil prices has eased some of the pressure on the CAD.
The new rules are more likely to involve caps on imports rather than raising the duty from the current 10 percent, sources suggested.
“They will cap the amount of gold that can be imported and how much each importer can bring in,” one said.
In China, spot premiums on the Shanghai Gold Exchange remain at $2 over spot, with demand starting to look healthier while consumers take advantage of cheaper prices in preparation for the Chinese New Year in February, an auspicious period to gift gold, market observers said.
Prices on international markets have recovered to current levels either side of $1,200 per ounce from four-year lows of $1,131.60 in October, albeit down from a 2014 peak of $1,388.
Hong Kong’s net exports of gold into China, commonly used as a barometer for Chinese demand, rose to a seven-month high in October at 111 tonnes.
Still, Macquarie questioned whether “the Hong Kong export data is becoming a less reliable guide to all of China’s imports, with press reports indicating the Chinese want more gold to come into Shanghai directly from other countries, not via Hong Kong”.
The continued clampdown on commodity imports for the purpose of financing has been choking off local demand, sources indicated.
The Hong Kong rate premium is unchanged at $1.50 as was the Singapore rate at $1.50, while Dubai slipped to $1.
(Editing by Mark Shaw)