India’s 2018 gold demand to remain below 10-year average

India is the world’s second-biggest gold consumer. (Reuters)
Updated 06 February 2018

India’s 2018 gold demand to remain below 10-year average

MUMBAI: Gold demand in India is likely to remain below its 10-year average for a third year in 2018 as higher taxes and new transparency rules on purchases may cap last year’s rebound in buying, the World Gold Council (WGC) said on Tuesday.
India is the world’s second-biggest gold consumer and lower demand there could rein in global prices that have risen 8 percent since mid-December, although a drop in imports of the metal would help India reduce its trade deficit.
Gold consumption in 2018 will likely be between 700 and 800 tons versus 727 tons last year, Somasundaram PR, the managing director of WGC’s Indian operations, said on Tuesday. Indian demand has averaged 840 tons over the last 10 years.
Gold demand will lag because of a higher goods and services tax (GST) on bullion purchases imposed in 2017 and measures to track gold purchases, he said.
In July, the GST on gold was raised to 3 percent from 1.2 percent. India has also made it mandatory for customers to disclose their tax code, or Permanent Account Number, for high-value gold purchases.
The government moves have disrupted the business of the small jewelers that account for nearly two-thirds of India’s total sales, Somasundaram said.
“More changes are coming in like hallmarking, responsible gold sourcing, all this will continue to disrupt the industry ... It will take two years for India to reach normal demand level,” he said.
Gold is a mainstay of Indian culture, serving as the primary vehicle for household savings for hundreds of millions of people in Asia’s third-largest economy.
Gold demand in the country rose 9 percent in 2017 from 2016 to 726.9 tons as jewelry demand increased 12 percent from a year ago, the WGC said in a report published on Tuesday.
India’s imports of gold ore jumped 73 percent in 2017 from the year before to a record 245.7 tons as the import tax on the semi-pure alloy made by miners is 0.65-percent lower than on refined gold, Somasundaram said.
Dore imports will remain robust even in 2018 due to the duty difference and huge installed refining capacity of 1,450 tons, he said.
Gold smuggling in India has surged since India raised its import duty to 10 percent in August, 2013 in an effort to narrow a gaping current account deficit.
Smugglers brought around 120 tons of gold into the country in 2017, with nearly the same amount expected in 2018 unless the government reduces the import tax, Somasundaram said.

Merkel seeks united front with China amid Trump trade fears

Updated 22 May 2018

Merkel seeks united front with China amid Trump trade fears

  • Merkel seeks common ground to ward off trade war
  • Plans complicated by US policy moves

Chancellor Angela Merkel visits China on Thursday, seeking to close ranks with the world’s biggest exporting nation as US President Donald Trump shakes up explosive issues from trade to Iran’s nuclear deal.

Finding a common strategy to ward off a trade war and keep markets open will be Merkel’s priority when she meets with President Xi Jinping, as Washington brandishes the threat of imposing punitive tariffs on aluminum and steel imports.

“Both countries are in agreement that open markets and rules-based world trade are necessary. That’s the main focus of this trip,” Merkel’s spokeswoman Martina Fietz said in Berlin on Friday.

But closing ranks with Beijing against Washington risks being complicated by Saturday’s deal between China and the US to hold off tit-for-tat trade measures.

China’s economic health can only benefit Germany as the Asian giant is a big buyer of Made in Germany. But a deal between the US and China effectively leaves Berlin as the main target of Trump’s campaign against foreign imports that he claims harm US national security.

The US leader had already singled Germany out for criticism, saying it had “taken advantage” of the US by spending less than Washington on NATO.

Underlining what is at stake, French Economy Minister Bruno Le Maire warned the US-China deal may come “at the expense of Europe if Europe is not capable of showing a firm hand.”

Nevertheless, Merkel can look to her carefully nurtured relationship with China over her 12 years as chancellor.

No Western leader has visited Beijing as often as Merkel, who will be undertaking her eleventh trip to the country.

In China, she is viewed not only as the main point of contact for Europe, but, crucially, also as a reliable interlocutor — an antithesis of the mercurial Trump.

Devoting her weekly podcast to her visit, Merkel stressed that Beijing and Berlin “are both committed to the rules of the WTO” (World Trade Organization) and want to “strengthen multilateralism.”

But she also underlined that she will press home Germany’s longstanding quest for reciprocity in market access as well as the respect of intellectual property.

Ahead of her visit, Beijing fired off a rare salvo of criticism.

China’s envoy to Germany, Shi Mingde, pointed to a “protectionist trend in Germany,” as he complained about toughened rules protecting German companies from foreign takeovers.

Only 0.3 percent of foreign investors in Germany stem from China while German firms have put in €80 billion in the Asian giant over the last three decades, he told Stuttgarter Nachrichten.

“Economic exchange cannot work as a one-way street,” he warned.

Meanwhile, looming over the battle on the trade front is another equally thorny issue — the historic Iran nuclear deal, which risks falling apart after Trump pulled the US out.

Tehran has demanded that Europe keeps the deal going by continuing economic cooperation, but the US has warned European firms of sanctions if they fail to pull out of Iran.

Merkel “hopes that China can help save the atomic deal that the US has unilaterally ditched,” said Die Welt daily.

“Because only the giant emerging economy can buy enough raw materials from Iran to give the Mullah regime an incentive to at least officially continue to not build a nuclear weapon.”