28% gold demand to be met through unofficial channels

'Since, the imposition of 80:20 rule, around 200 tonnes of gold was imported through unofficial channel into India'

A total of 28 per cent of India’s gold demand this year is likely to be met through unofficial channels, the World Gold Council (WGC) has said. Since the 80:20 norm was introduced in July last year, smuggling activities have intensified.

“This year alone, we estimate about 200 tonnes of gold to be supplied into India through unofficial channels, against 150-200 tonnes last year. Unofficial channels, therefore, are set to contribute 28 per cent to India’s total gold supply,” said Somasundaram P R, managing director (India), WGC.

According to WGC, India imported 825 tonnes of gold in 2013, including unofficial imports. Considering the overall demand of about 900 tonnes and the unofficial-channel supply of 200 tonnes, India’s overall gold import this year is estimated at 700 tonnes.

A recent report by the Associated Chambers of Commerce and Industry of India had estimated gold imported through unofficial channels in 2013-14 at 150 tonnes.

In the quarter ended June, WGC said, 224 tonnes of gold were imported, against 127 tonnes in the March quarter and a staggering 352 tonnes in the June quarter of 2013.

“Supply through unofficial channels is dangerous. For consumers, however, the source is immaterial,” said Somasundaram.

WGC forecast domestic supply from recycled gold to remain range-bound this year, due to unattractive prices for jewellers.

In the June quarter of this year, the average price of gold declined nine per cent to $1,288 an oz. After posting healthy growth of 24 per cent between 2002 and 2013, the current price wasn’t encouraging consumers to sell, Somasundaram said.

He added, “There are reports the government will cut import duty two-four per cent.”

Earlier, experts had said customs duty of more than five per cent encouraged import through unofficial channels.

Gold supply estimates (tonnes)
Particulars	Q2’ 13	Q2’ 14	Variations
Imports	352	224	(-)36.36
Recycling	10	16	60
Others	2	3	50
Total supply	364	243	(-)33.24
Smuggling*	150-200	200 and above	--
Source : World Gold Council, * annual figures for calendar year 2013 and 2014 respectively