The bounceback in the Indian gold market continued last month.
Indian gold imports hit a 21-month high in February and there was robust retail demand.
This comes on the heels of a 72% year-on-year increase in gold imports in January.
Some policy shifts recently announced by the Indian government in its Union Budget will likely have a positive impact on the country’s gold market. India ranks as the second-largest gold-consuming country in the world, second only behind China.
The three key policy changes that will likely affect the gold market are:
Last month, we reported on signs of revival in the Indian gold market. Gold imports hit a 19-month high in December.
That revival has continued into 2021. Gold imports in January were up 72% year-on-year, and some shifts in government policy could give demand another shot in the arm.
India ranks as the second-largest gold consuming country in the world, second only behind China. But over the last couple of years, the gold market in India has languished due to a combination of record-high gold prices in rupee terms and the economic impacts of the coronavirus pandemic. But were signs of revival in the Indian gold market last month.
Gold has helped Indians weather the economic storm caused by the coronavirus pandemic.
The government response to COVID-19 has ravaged the Indian economy. As a result, many banks are reluctant to extend credit due to fear of defaults. In this tight lending environment, many Indians are using their stashes of gold to secure loans.
The silver market in India has enjoyed massive growth over the last several years. Demand for the white metal has increased from around 3,000 to 6,000
tons over the last five years, according to Chirag Thakkar, CEO of the Indian bullion company Amrapali Gujarat.
The Silver Institute interviewed Thakkar for the latest edition of Silver News.
Gold has become a lifeline for Indians in the midst of a severe credit crunch.
When the state-run lender refused to extend Babasaheb Mandlik credit, he used his wife’s gold jewelry as collateral for a loan in order to buy cotton seeds before the summer sowing season window closed.
The Reserve Bank of India has jumped on the gold bandwagon.
Since December 2017, the Indian central bank has added 50.4 tons of gold to its reserves.
India bought 8.2 tons of gold in January and February of this year and analysts project that pace to pick up. Economist Howie Lee told Bloomberg he expects the RSB to add as much as 1.5 million ounces of gold to its reserves in 2019. That comes to about 46.7 tons.
Everybody wants gold. Some people want it so bad that they’re willing to break the law to get it. That’s why we have police. They stop the bad guys.
At least that’s how it’s supposed to work. But don’t miss what I said. Everybody wants gold. Police officers fall into the category of “everybody.” So, it should come as no surprise that every once in a while, you run into a cop willing to break the law to get his hands on some sparkling yellow metal.
This, in fact, happened recently in India.
Last week, there was some significant news out of India that could further boost the country’s gold market.
The Indian government will now allow banks to engage in gold bullion business – including holding, buying, selling, hedging and leveraging the yellow metal. Under current rules, banks can only serve as a consignment or channeling agent in the import of gold bullion for jeweler and exporters.
The loosening of regulations could increase a gold market that already ranks as the second-largest in the world behind only China.