Insights

When Dr Duvvuri Subbarao was Governor of the Reserve Bank of India, the country’s gold reserves increased by more than 50%. Now a Distinguished Visiting Fellow at the NUS Business School in Singapore, Dr Subbarao explains why he believes gold has such a significant role to play among central banks, particularly those from emerging markets.

• Indian gold imports reached just 37.7t in July 2019 – 49% lower than the same month last year 
• The domestic gold price was 2.3% higher in July compared to June; 23% higher y-t-d
• The custom duty on gold was unexpectedly raised by 2.5% in the Union Budget on 5th July
• With elevated domestic gold prices and a higher custom duty, the discount in the local gold market reached a peak of US$28/oz in July
• Volatile prices and weak physical demand encouraged healthy gold futures trading on MCX: volumes touched a high of 46.8t in July

On Friday 2nd August, the Blueprint for Gold Spot Exchange in India was released at the India International Gold Convention (IIGC) in Amritsar. The report was produced by the industry steering committee, which is comprised of 27 major stakeholders of the bullion industry – both global and domestic and is chaired by the World Gold Council.

Summary

• Indian gold imports were 62t in June 2019 – up slightly on the same month last year 
• The domestic gold price was 6.1% higher in June as compared to end of May
• With higher domestic gold prices, the local discount in the gold market reached $23/oz (1.6% to the international price) by end of June
• Higher and relatively volatile prices encouraged gold futures trading on MCX: volumes touched a high of 28.2t in June 

Summary

• On 6th July, India’s gold import duty increased from 10% to 12.5% as part of a revenue-raising budget
• We believe it will have a negligible long-term effect on gold demand
• We think it may be a temporary measure: when the government’s books are in better shape we may see some of these tax increases rolled back
• The market will be supported by other government initiatives, including the structural reforms such as the India Gold Spot Exchange and plans to boost rural incomes

Akshaya Tritiya is one of the most auspicious occasions in Hindu religion. The word Akshaya means ‘Eternal’ and Akshaya Tritiya is thus considered an auspicious day for, among other things, starting a business, buying a property or making an investment. Buying gold on Akshaya Tritiya is believed to bring good fortune and prosperity. On the day itself, there is even a specific time period which is seen as auspicious for buying gold – the shubh muhurat.