Julian Phillips sees Indian gold demand continuing upwards again despite the government leaving gold and silver import duties where they were in its latest budget
The Indian budget did not lower duties on the import of gold into the country as was expected. However, the wholesalers who had held back on stocking up until they knew if the duties would be lowered or not, will now move into the market to stock up, knowing now that there is no reason to wait any longer. Very little in India follows a straight line, so smuggling will continue to make up any shortfall in demand albeit at only slightly lower prices.
When duties are high, legitimate import routes drop as smuggling grows, so now that there is no hope of duties falling now, we expect to see the volume of smuggling continue at present levels, or rise from now on. Demand for gold in India, even with the 10% duty has been on the rise of late and is expected to rise further in 2015 as the gold buying classes of India become wealthier. With the country set to see strong economic growth under the Modi government this trend will continue to rise for the foreseeable future. Because nothing is straight and definable when it comes to true gold imports, any import numbers that are quoted are inaccurate, because of illegal entry routes for gold into the country. We sometimes see tonnages of gold smuggled into the country quoted. Of course, these are completely inaccurate. We are of the opinion that annual gold imports are of the level of previous records before duties were raised in August 2013 of 1,200 tonnes, simply because the premiums on legitimate gold are low, implying that demand is being met nearly fully [from both legal and illegal entry points] This total is on the rise, constantly.
The euro lurched lower on Friday to $1.1187 but has risen slightly to $1.1225 today with the dollar index at 95.17. There is strong resistance in the marketplace against further rises in the dollar. Will this continue? If it does we expect to see gold and silver rise in the dollar.
New York closed Friday at $1,211.1 up $2.70. Asia took the gold price up to $1,221 before London pulled it down to $1,214. London then Fixed the gold price at $1,216.75 up $11.75 and in the euro, at €1,084.931 up €11.339, while the euro was almost unchanged at $1.1215. Ahead of New York’s opening, gold was trading in London at $1,213.60 and in the euro at €1,081.01.
The silver price closed Friday at $16.57 up 3 cents. Ahead of New York’s opening it was trading at $16.60.
Again there were no purchases or sales into or from the SPDR gold ETF or from or into the Gold Trust on Friday. The holdings of the SPDR gold ETF are at 771.249 tonnes and at 166.43 tonnes in the Gold Trust. The silver price is moving up cautiously watching to see if the gold price moves back to its recent high of $1,270. We expect it to run ahead of gold, should the gold price move through $1,230.