Why is the Demand for Gold in India Falling?

ETFS

Reports from India indicate gold imports dropped 21.43 billion USD in the April-October months this year (2019) compared to 2018.  That’s an 18.4% drop which is significant in anyone’s book.

Regular followers of The Gold Enthusiast know he watches Indian gold figures closely, as India is often the world’s largest importer of raw gold.  Indian consumers are traditionally among the world’s highest purchasers of new gold jewelery and small gold bars, thanks to gold-gifting customs related to their marriage and gifting seasons.

But a few years ago the Indian government decided they wanted a piece of the action, and imposed a 5% VAT tax on many forms of gold. This, along with an unfortunate recession, caused gold-everything sales to plummet in the country. The government has since reversed much of the VAT and demand is slowly returning.

But longer-term effects of the tax policies may have changed things for the worse for India. Unconfirmed reports over the summer indicated some Indian jewelery companies moved production to other countries to escape the VAT.  Today’s report (cited above) is the first official mention of such moves your Gold Enthusiast has seen.

What it means to gold market followers is there may be a new normal for Indian gold import figures. We will have to see if this quarter’s gold figures are similar to the 18%+ drop noted above.

One side effect we’re sure no gov’t official thought of is the move of some jewelry production to other countries.  As the US found out with the NAFTA agreement, job reductions for the local population are no joke in the long-term.  Once lost such jobs are often hard to win back. And for the hard-pressed Indian middle- and lower-classes, any reduction in jobs is a serious thing.

We’ll continue to keep our eye on the Indian gold market, and keep you posted.

Signed,

The Gold Enthusiast


The SPDR Gold Shares (GLD) was trading at $137.42 per share on Monday morning, down $0.32 (-0.23%). Year-to-date, GLD has gained 11.14%, versus a 17.76% rise in the benchmark S&P 500 index during the same period.

GLD currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #1 of 33 ETFs in the Precious Metals ETFs category.


About the Author: Mike Hammer

Mike HammerFor 30-plus years, Mike Hammer has been an ardent follower, and often-times trader, of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, he’s mentored others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group.

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