Gold up 16.8% this Samvat

Outlook rosy for medium to long term but import duty and GST could be dampeners

The price of gold in the current Samvat (the Hindu year now coming to a close) broke a three-year losing streak, when investors in gold and silver were losing money.

Gold was up 16.8 per cent in Mumbai during the current Samvat; silver returned 21.4 per cent.

Trend predictors now await the American election results. The consensus is that the price of gold is unlikely to fall by much in India in the coming year, whatever happens globally.

GFMS Thomson Reuters said in a report issued on Thursday: "A Trump victory (in the US) could spark a rally to $1,400 )an ounce, for gold) and even $1,500 but a victory for Clinton would likely see the price ebb. In a fortnight, this would be clear.”

It also said gold was set to stay well above $1,200 an oz in the next Samvat; it sees them etal finding a base around $1,240 (the price is now $1,268).

However in India, according to Gnanasekar Thiagarajan, director at Commtrendz, a risk advisory: “Before a US rate hike, the price might slowly drift towards $1,200, which could act as a support, as at that level the demand will come. But, historically after a US rate hike, gold has rallied and equity has suffered. In that rally, gold might even cross $1,400 an ounce.”

If the international market falls to $1,200, he feels the Indian price per 10g could fall to Rs 28,000; investors in India should consider the possible price impact if the import duty is cut. His feeling is that the government could cut the duty in phases during the year ahead by three to four percentage points.

In rupee terms, a two per cent duty cut means Rs 500-600 less per 10g. Before deciding, he said, the government would see how the various gold schemes were progressing.

Indian demand has improved this month, after seven months of lull. In the September quarter, net import for domestic supply including smuggling, was 111 tonnes, against 248.2 tonnes in the same quarter of 2015, said GFMS. Jewellery consumption was down 41 per cent in the quarter to 107.6 tonnes. Retail investment demand was down 60 per cent to 22 tonnes.

In sum, demand should improve in India if prices turn reasonable and the uncertainties on import duty cuts and US rate hikes are over; also, the system has to get adjusted to the new governance norms — PAN number, excise duty and the new goods and services tax.