Gold imports to fall further

While falling gold prices might have come handy for the government of India in managing the current account deficit (CAD), another major relief can be expected from the actual moderation in imports.

According to the Bombay Bullion Association (BBA), gold imports stood at 200 tonnes during the January-March quarter of 2013. This is down 24 per cent from the corresponding quarter of the previous year. However, after the current meltdown and waning investor interest, gold imports are expected to fall to just 150 tonnes.

In January, gold imports were around 100 tonnes. With traders fearing the government would impose more duty, gold imports began rising. The government imposed an additional two per cent import duty, taking the total duty to six per cent. This calmed the demand initially and gold prices started correcting in the international markets, leading to demand contraction.

Mohit Kamboj, president of BBA, said, "With investors moving out of gold, demand for gold will be further affected. In the April-June quarter, we estimate imports around 150 tonnes."

The bull-run in gold started in 2001 when the yellow metal was priced at around $270. Following this, for 12 years investors saw only a one-sided journey - northward. A whole generation of investors has not seen gold falling. But that changed and in the last two days, gold in Mumbai fell eight per cent to a 19-month low, while silver fell 10.5 per cent to a 26-month low.

"Investors are losing confidence in gold. All jewellers are saying there could be a further fall, so they are waiting for Rs 25,000 ($460) levels," said Kamboj, referring to the price per 10g.