New tax could dampen India gold demand in short-term -WGC

New tax could dampen India gold demand in short-term -WGC.(AFP)
Updated 07 July 2017
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New tax could dampen India gold demand in short-term -WGC

MUMBAI: A hike in taxes on gold sales in India could pressure short-term demand from the world’s No.2 consumer of the metal, the World Gold Council (WGC) said in a report.
Faltering appetite in a country where gold is used in everything from investment to wedding gifts could drag further on global prices, already trading near their lowest level in eight weeks.
“In the short-term at least, we believe (the tax) may pose challenges for the industry. Small-scale artisans and retailers with varying degrees of tax compliance may struggle to adapt,” the WGC said in a report published on Thursday.
As part of a new nationwide sales tax regime that kicked in on July 1, the Goods and Services Tax (GST) on gold has jumped to 3 percent from 1.2 percent previously.
There have been fears the tax increase could stoke under-the-counter buying and drive up appetite for precious metal smuggled into India, where millions of people store chunks of their wealth in bullion and jewelry.
Meanwhile, the WGC also said a government move to ban cash transactions over 200,000 rupees ($3,090) from April 1 could hurt gold demand in rural areas where farmers often purchase the metal using cash due to limited access to cheques and electronic payment systems.
Two-thirds of India’s gold demand comes from rural areas, where jewelry is a traditional store of wealth.
“(The transactions rule’s) potential impact isn’t entirely clear: it could curb gold purchases; it could encourage gold shoppers to buy smaller amounts of gold spread over more transactions; or it could push a large part of demand underground and encourage a black market in gold,” said the WGC.
The group kept its demand estimate for India at 650 to 750 tons for 2017, well below average annual demand of 846 tons in the past five years.
In the long-term, the GST will have a positive effect on the gold industry by making the sector more transparent and improving the supply chain, the WGC added.


World’s biggest sovereign fund worried about trade wars

Updated 52 min 2 sec ago
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World’s biggest sovereign fund worried about trade wars

  • The fund posted a positive return of 1.8 percent, or 167 billion kroner ($19.8 billion), in the second quarter
  • Markets are worried about a trade dispute between the United States and China

OSLO: The managers of Norway’s sovereign wealth fund, the world’s biggest, expressed concern Tuesday about global trade tensions, which could heavily impact its value.
The fund posted a positive return of 1.8 percent, or 167 billion kroner ($19.8 billion), in the second quarter, helping erase a loss of 171 billion kroner in January-March that was attributed to a volatile stock market.
The Government Pension Fund Global, which saw its total value swell to 8.33 trillion kroner by the end of June, manages the country’s oil revenues in order to finance Norway’s generous welfare state when its oil and gas wells run dry.
But Norway’s central bank, which runs the fund, said geopolitical and trade tensions presented a risk.
“It’s fair to say that increased trade barriers or even trade wars will not be beneficial for the fund as a long-term global investor,” Trond Grande, the deputy chief of Norges Bank Investment Management, told reporters.
Markets are worried about a trade dispute between the United States and China. Accusing Beijing of unfair competition, the US administration is considering slapping a new round of levies worth $200 billion on Chinese goods.
Talks between the two slated for Wednesday and Thursday aimed at resolving the dispute have however eased concerns somewhat.
Following US-Turkey tensions that sent the Turkish lira and the Istanbul stock market tumbling, the Norwegian fund said its assets there were worth less than the 23 billion kroner they were at the beginning of the year.
“We’ve seen the market rise for a long time, that there are different political and geopolitical events in the world that can affect the market, and we have to be prepared for the fact that (the value of) the fund can go down a lot,” Grande concluded.
The fund’s strong second quarter was attributed primarily to its share portfolio, which accounts for 66.8 percent of its investments and which rose by 2.7 percent.
Real estate holdings, which account for 2.6 percent of its holdings, rose by 1.9 percent, while bond investments, which represent 30.6 percent, remained flat.
Faced with falling oil revenues in recent years, the Norwegian government has been tapping the fund to finance public spending since 2015. But with oil prices recovering, the fund registered its first inflow in three years in June.