After rising 71% in Dec, five reasons why gold imports will halve in Jan

After rising by a staggering 71% in Dec 2017, the decline in imports this month has its roots in both tradition and economics

After a sharp rise in gold imports in the December, inward shipments of the precious metal are expected to halve in January. According to data from the ministry of commerce released on Monday (yesterday), gold imports in December 2017 were up 71 per cent to $3.39 billion. In tonnage terms this is 81 tonnes from 30 tonnes in December 2016.

However, a source tracking imports say, “In January, the import figure is expected to fall sharply and may halve from December.” Based on his analysis and talks with market players, there could be five reasons why January imports could be lower. 

1. The first half of January (ahead of 14 January or Makar Sankranti) is considered as inauspicious for gold buying, hence the demand has been low.

2. Gold price are also on the rise and Indian demand, according to the source, has been price sensitive. During the past one month international gold prices have risen 6.5 per cent and the metal is quoting at $1,337 an ounce. In Mumbai, the price is up 5.4 per cent and at its highest since September 2017, at Rs 30,095 per 10 grams.

3. The price rise that began  mid-December prompted the market to curb imports in order to rein in further price increases, and to ensure a favourable revision in tariff value in January. The government announces revision in the tariff value for calculating gold import duty every fortnight. This benchmark was hiked in January due to higher price in the second half of December. 

4. Importers have calculated this in advance and hence advanced January imports.In January 2017, around 48 tonnes of gold were imported, but market players believe this month (January 2018) imports could be much lower at around 40 tonnes. This explain reports that the Union Commerce Ministry has proposed reducing gold import duty to a level that makes smuggling unremunerative. Smuggling has not fallen even after a year of demonetisation and two quarters of implementation of GST. 

5. Due to expectations of a duty cut on February 1 when Union budget is to be presented, “traders and importers are cautious about importing gold,” the source says.