Showing posts with label India. Show all posts
Showing posts with label India. Show all posts

Thursday, February 7, 2013

Gold ETFs in India touch 40 tonne (40,000 kilo)

Continued investor demand and rising prices help ETF assets as well as reserves double from May 2011

Author: Shivom Seth

India's high gold imports are hurting the country's current account deficit. The government's import restrictions are hurting the populace. The only organisation not worried, as of now, are gold backed exchange traded funds.

Worried investors are veering towards the country’s 14 gold exchange traded funds (ETFs), which together have garnered 40,000 kilo of the precious metal.

The ETFs allow investors to trade in the metal in a non physical form and electronically on stock exchanges. Gold ETFs debuted in India about six years ago.

The first gold ETF launched in 2007 by Benchmark Mutual Fund (now Goldman Sachs) was followed by 13 others in quick succession. The 14 mutual fund houses present in this segment are managing gold assets worth nearly $2.2 billion (Rs 120 billion).

In terms of gold weight, Goldman Sachs Gold ETF manages 11,218 kilo, followed by RShares Gold ETF with nearly 9,800 kilo. Kotak Gold ETF and SBI Gold ETS hold about 4,500 kilo each.

Incidentally, comparatively smaller gold ETFs from UTI and HDFC fund houses manage gold weighing less than 3 tonne each.

While one might consider the gold stocked at the ETF a huge cache, it could also prove to be a bane for some. SBI chairman Pratip Chaudhuri was recently quoted by newswire agencies as saying that the bank was unable to profit from the two tonne of gold lying in the gold deposit scheme of the bank, or lend it out.

Recently, the Indian government allowed gold ETFs to deposit part of their gold holdings with banks in an effort to manage the demand for imported gold. The idea was to put the gold corpus of ETFs to productive use.

The SBI chairman, however, is not too hopeful. Gold ETF's have a tax rate of 10%, as compared to bank deposit interest tax rate at 30%. Investors would necessarily go to gold ETFs, rather than invest in bank deposits.

Incidentally, bank finance for purchases of gold bullion has been prohibited, though banks have been allowed to continue their role as nominated agencies in gold imports. The government had also strongly advocated the cause to unlock the value of idle or unproductive gold, which lays in vaults across the country.

The SBI chairman complained that the government was not making it conducive for investors to bring their gold to the bank.

If an investor buys gold from the bank, he cannot return the gold to the bank. This has limited many purchases, since the selling option does not exist with gold bought from banks across the country.

The chairman has suggested that the government ensure a two way opportunity, a buy and sell option, and have investors approach banks either to buy or to park their precious metal.

However, at 40 tonnes, India's total gold ETF holding is only about 10% of the 398 tonne of gold the country imported in the April-October 2012 period.

Source: Mineweb

Tuesday, January 22, 2013

Traders to lose heavily as India hikes gold import duties to 6%

The hike in gold import duty in India is set to help smugglers push the precious metal and increase the price of gold by $13 per ten gram in the domestic market.

Author: Shivom Seth

In what some fear will be a crippling blow, the Indian government has hiked the import duty on gold and platinum to 6% from 4% with immediate effect, in a move aimed at curbing imports of the precious metals and check the widening current account deficit.

India's passion for the yellow metal could dive by about 25% as a result of the import duty hike, according to the All India Gems and Jewellery Trade Federation's Bachhraj Bamalwa, who addedd the precious metal had put such a strain on finances that the government was left with no option but to hike the duty.

"The decision will boost smuggling and the parallel economy. The Indian government will lose heavily," he said.

On a day when gold climbed toward a one month high in the international market, rising to $1,689.87 an ounce, the Indian government has dealt a body blow to the Indian industry, said retailers.

The yellow metal’s price rose in the global market on hopes of the US announcing further stimulus measures. Silver, too, is expected to gain as it trades near a month’s high in the global market.
The Bombay Bullion Association has predicted that gold imports in the March quarter are expected to slow down to 100 tonnes against the 200 tonnes logged in the December quarter.

"It is not just a question of halving imports for the next quarter. The cost of a kilogram of gold will increase from $2,603.42 (Rs 140,000) to $3,719.17 (Rs 200,000). This will act as an incentive for many people to bring in smuggled gold," said an official.

Prithviraj Kothari of RiddiSiddhi Bullions said there would be a difference of 7% between the domestic and the international price of gold. This, he added, would have Indians bringing in more gold into the country while on their trips abroad.

"The government should harness the existing reserve of gold in our country. It is just targeting imports all the time,'' he added.

While investment demand for the precious metal is expected to fall immediately, gold consumption in the jewellery sector is expected to remain largely unaffected.

SOPS INCLUDED

As if doling out a sop, the Indian government has also decided to link the Gold Exchange Traded Fund (ETF) with the gold deposit scheme, which will enable mutual funds to unlock their physical gold and invest in gold linked schemes offered by banks.

The changes proposed to the gold deposit scheme are expected to make it attractive for individuals to deposit their idle gold with banks. India is the world's largest consumer and importer of gold.

However, outflow of the foreign exchange on gold imports has been impacting the country's current account deficit, which has widened to $38.7 billion or 4.6 per cent of the GDP during the first half of the current fiscal.

Gold imports in 2011-12 amounted to $56.5 billion. In the current financial year, till December, they are estimated at $38 billion. The hike in customs duty is also set to impact overall jewellery demand.

In a note, Geojit BNP Paribas Financial Services said that the country had managed to do away with gold smuggling, but with the higher duty structure, the phenomenon would reoccur and lead to unwarranted illegal activity.

Jewellers has also expressed concern that the duty hike would result in large scale smuggling.

Saturday, January 12, 2013

Indian gold imports surge amid fears of further duty hikes

Jewellers say they will shut up shops in protest if the government further raises import duties on the precious metal and warn that smuggling will likely grow as a result.

Author: Shivom Seth

While jewellers across India are planning to launch an agitation against the Indian government's proposal to increase import duty on gold to around 6% from the current 4%, a massive jump in gold imports has been witnessed across the country.

"With the news that the government is considering such a move (to hike import duty) and could most probably make an announcement in the Budget next month, bullion houses have jacked up their imports of the precious metal considerably since the last week,'' said Prithviraj Kothari, of bullion house Ridhi Sidhi Bullions.

Wednesday, January 9, 2013

Indian companies hunt for iron-ore in Brazil

Stung by the crisis in iron-ore mining at home, the Indian Steel Ministry has initiated bilateral talks with Brazil in an effort to seek ore resources in the Amapá province for Indian companies.

Iron-ore miner, NMDC, steel producer Rashtriya Ispat Nigam Limited (RINL) and MOIL Limited (formerly Manganese Ore India Limited) have started the process of acquiring Brazilian iron-ore assets, an official in the Steel Ministry said.

“Government-to-government bilateral talks have started following the Steel Ministry secretary’s visit to Brazil, last November. Current talks revolve around seeking the Brazilian government’s facilitation in identifying operating iron-ore mines in which the Indian companies could participate as strategic investors,” the official said.

“In fact, in response to inputs provided by the Brazilian government, NMDC has identified two operating reserves in the Amapá province of Brazil and due diligence on them will commence shortly,” the official added.

The focus on Brazilian iron-ore reserves was linked to the Steel Ministry's goading of Indian steel producers to seek raw material assets overseas in the wake of a rising trend of raw material imports and increasing shortages of accessable privately mined iron-ore, the official said.

In the wake of a clampdown on illegal mining and a Supreme Court order closing down iron-ore mines across the provinces of Goa and Karnataka, Indian companies were forced to import nine-million tons of ore during April to October 2012, with imports expected to continue to rise owing to the fact that total production during 2012/13 was not forecast to exceed 72-million tons.

According to Steel Ministry officials, Indian steel producers would have faced the ironic situation of rising ore import dependency despite a domestic resource of 28.52-billion tons, with overseas asset acquisition becoming a medium-term imperative to maintain growth in steel production.

The officials cited the example of RINL, which despite being owned by the government and completing a $2.5-billion investment to ramp up steel making capacity to 6.3-million tons a year from three-million tons a year, had not been allocated iron-ore reserves for captive mining despite submitting several applications over the years.

Edited by: Esmarie Swanepoel

Sunday, December 30, 2012

India’s ultra rich: younger, richer and buying gold

India has one of the fastest growing high net worth segments in the world and its members like to have gold in the kitty

Author: Shivom Seth

India’s community of high net worth individuals is growing fast and, for them, the most favoured form of investment is gold.

The HNI population in India rose by around 20.86% in 2010, and their wealth is estimated to have grown by more than 11%, to $530 billion. India is one of the fastest growing HNI segments in the world, currently contributing approximately 1.2% to the global HNI wealth.

“The number and wealth of the ultra HNIs has leapfrogged in the last decade. With an estimate that in the next five years, there would be about 219,000 such households, up from the current 62,000 households, their net worth is also expected to grow five times,'' says Rupesh Nagoria, product head at broking firm, Alchemist House.

And, importantly, while their assets are growing the members of this class are also getting younger.

The average age of Indian high networth individuals (HNIs) has fallen to the mid-40s from the early 50s in just five years. Though precious metals still holds the roost, Indian HNIs are experimenting with a gamut of investments, from fixed income instruments, commodities to art and private equity firms.

But, with equities in India looking overvalued, wealth managers are setting their eyes on the yellow metal.

“We have been advising clients to invest in gold since the last one year. The interest has tremendously shot up during the last few days, with the festive season coupled with the marriage season. The allocations have certainly gone up from less than 1% to 5% of our clients’ portfolio,'' says Manish Dange, bullion advisor at investment firm, Wealth Management.

Manish Bhatia of Religare Macquarie Private Wealth said that around five years ago, people did look at art or films funds as an alternative investment option. ``It turned out to be too exotic for most. Not many are looking at these as investment options now, and have moved to less riskier options like gold,'' he adds.

Adding that Indian gold prices are highly correlated with international prices, he said the fluctuations in the Rupee-US Dollar impact domestic gold prices and have to be closely followed by most HNI investors.

Investment in gold is expected to continue to be the largest and preferred investment class, at least in the next couple of years.

According to Nagoria, most investors typically look at protecting their wealth and making real returns. ``They tend to take a higher risk in their business and want their investment portfolio to be comprised of safer assets. They also like to maintain close control over their assets, and gold affords them that ease,'' he said.

Investment bankers added that though a wide range of better regulated investment options have made their way into the financial marketplace over the last decade, the sheer complexity of these options, in terms of inherent risks, benefits and objectives, has got the average investor more confused than ever.

At such a time, most HNIs prefer to invest in gold and leave the headache to someone else, added Nagoria. Most analysts are positive on the precious metal for two reasons: the dollar depreciation and the sword of inflation in India.

``Gold is an asset class which can give one easily more than 10% stable returns annually. We advise our HNIs to go for gold or even gold ETFs for ease of saving,'' said Bhatia.

Investors, specifically those in the ultra HNI category, invest significantly in gold. ``They do not consider buying jewellery for investments. Instead, they prefer investing in the form of ETFs and bars. Most brokers tend to recommend ETFs to their HNI clients, as there is a problem of storage with bars. Gold bars cannot be sold in the open market in India and in most cases, the seller himself will not buy it back,'' said Shailesh Manthan, bullion retailer.

With the country's savings rate expected to stabilise at 35% levels going forward owing to high economic growth, HNI investors are expected to continue to show robust interest in gold as an asset class.

Source: Mineweb

Tuesday, December 25, 2012

India continuing to drive steel production

If all planned capacity expansion projects become operational in India, the country could become the world’s second largest steel producer by 2015

Author: Shivom Seth

Demand for steel in India is rising. Global steel production grew by 5.1% in November to 121.6 million tonnes. India's contribution was 6.4 million tonnes, with most experts insisting that the country's steel demand is set to rise in the new year.

Though China tends to be the focus of the steel market given its status as the world’s largest producer, India could soon take over the mantle as the fastest growing producer of the metal within the next few years, if one goes by the opinion of its steel producers.

Somdeb Banerjee, Tata Steel’s executive for South Africa said India’s steel capacity could almost triple between 2010 and 2020 to reach 179 million tonnes a year. He was speaking at the Coaltrans Mozambique conference in Maputo.

In 2011, India became the fourth largest steel producing nation in the world with production of over 74 million tonnes. However, the country has a very low per capita consumption of steel of around 59 kilos as against an average of 215 kilos in the world.
 


This wide gap in relative steel consumption indicates the potential ahead for India to raise its steel consumption, maintain experts.

C S Verma, chairman of Steel Authority of India (SAIL) notes that India's steel demand could swell in the new year. To cater to the demand, he added, SAIL's plants were running at over 100% capacity utilisation.

In October, India's steel consumption was estimated to have risen over 1% to 6.12 million tonnes as compared to 6.08 million tonnes in September.

In November, India's production increased by 6.6%, as compared to the same month last year. India had produced 6 million tonnes of steel in November 2011.

``The country's per capita consumption of steel has risen by nearly 25% during the past five years to 57 kilo during 2011, as compared to 45.8 kilo during 2007.
In 2011, India's net steel consumption stood at 67.8 million tonnes, and has risen from 64.9 million tonnes a year ago,'' said Parul Kotakh, metal analyst.

He added that for the steel industry in India, volume growth would be visible in the years to come, largely due to the continuation of infrastructure spending, including housing and strong demand from the automobile sector.
 

``This,'' added Santanu Shah of Crisil Research, a division of a ratings agency, ``could help in driving demand for value added steel products like cold roll steel and exports.''
 

From 2006-07, demand grew at a robust 9% CAGR, spurred by rising investments in infrastructure and construction, and strong growth in capital goods and automobile sales. However, the slowdown in the global economy may spiral India’s steel demand trajectory.

Research firm Frost and Sullivan is, however, bullish. If all planned capacity expansion projects become operational in India, the country could become the world’s second largest producer by 2015, said Venkatesan Subramanian, director at Frost and Sullivan.

He added that non ferrous metals like aluminium, copper and zinc would grow at a similar pace as that of ferrous metals, given the high demand from the automobile sector.

Buoyed by India's demand scenario, SAIL is currently undergoing a round of expansion that will take its production capacity to 18 million tonnes from the existing 14 million tonnes by the end of current financial year.

The company would also be commissioning a new cold rolling mill at the Bokaro plant by the fiscal end. SAIL has spent about $7.0 billion (Rs 390 billion) so far on capacity expansion. Its targeted investment plan is $13 billion (Rs 720 billion).

Source: Mineweb

Monday, December 24, 2012

Gold Market Report 24 December

Gold Regains Some Ground, "Good Demand" for Gold from India

ON THE FINAL day before Christmas, gold prices edged higher Monday morning, climbing to $1665 per ounce and recovering some of the ground lost last week.

Friday afternoon's London gold fix was $1651.50 an ounce, a 2.6% weekly fall and the biggest weekly drop since June.

"[Gold's fall] opens up a move to the next major support, which are the lows in the $1520s," says Friday's technical analysis note from Scotiabank.

On the physical bullion market, gold demand from traditional world number one India picked up Monday, dealers reported.

"Demand is good," one dealer at a state-run bank in Mumbai told newswire Reuters earlier today.

"Buyers are placing orders for limited stocks with banks. They know the supply situation will remain tight for the next few days. Overseas suppliers are going on leave."

Silver meantime rallied to $30.39 an ounce before easing slightly, like gold regaining a little of the

Stocks and commodities were broadly flat Monday morning, while the Euro gained against the Dollar but remained below last week's seven-month high.

In New York, the so-called speculative net long position of gold futures and options traders – the difference between bullish and bearish contracts held – fell to its lowest level since August in the week ended last Tuesday, weekly data published by the Commodity Futures Trading Commission show.

Elsewhere in the US, politicians negotiating over how to deal with the government's deficit have left Washington for Christmas without any deal being agreed. The US economy is due to hit the so-called fiscal cliff of around $600 billion of spending cuts and tax cut expiries, starting next Monday, if Congress does not agree new legislation.

Here in Europe, current Italian prime minister Mario Monti said Saturday that he will not run in February's parliamentary elections. He added however that he would consider being prime minister if nominated to the post by an elected coalition that would back what he called "the Monti agenda" of economic reforms.

"While he may not have thrown his hat into the ring," says Nicholas Spiro, managing director at consultancy Spiro Sovereign Strategy, "Il Professore has become Il Politico whether he likes it or not...[Monti] has made it crystal clear where his political allegiances lie and that he's ready to head

Italy's next government."

Ben Traynor

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Tuesday, December 11, 2012

Silver sales set to outshine gold in India

Investors in India are bullish on silver, saying the white metal is in position for a potentially spectacular move over the next year and more.

Author: Shivom Seth

Indian retailers are bullish on silver. With supplies tightening, deliveries are slowing down this week in the bullion market in Mumbai. What has also buoyed sentiment is that silver continues to lead precious metals, and sales have jumped over 24% this year.

Snapping a two day losing trend, both the major precious metals, gold and silver, bounced back in the Mumbai market on buying by retailers at existing low levels. While gold rebounded to $575 (Rs 31,205) per 10 grams (US$1788/oz), silver gained by 1.38% to $1,159.49 (Rs 62,930) per kilo ($36.06/oz).

"Strong support is expected in the Silver March contract around $1,159 (Rs 62,900) ($36.05) from the start of the week," said analysts tracking the white metal. Traders have been taking long position in the Silver March contract above $1,161.49 (Rs 63,050) ($36.13) for target near $1,178.88 (Rs 64,000) ($36.67) for this week, they added.

Silver prices have remained steady at around $32 since mid-May. "Though everybody has been gushing about the returns that gold has given over the past four years, it is the white metal that has streaked ahead," said Manjusha Madani, bullion analyst at an investment house. 

She added that silver prices have jumped from $304.39 (Rs 16,525) per kilo ($9.47/oz) in 2008 to $1,381.95 (Rs 75,020) per kilo ($42.98) in 2011, a gain of 354%. Though prices have dropped per kilo, it does not mean that the potential in silver is exhausted, she added.

An analyst report had also shown how silver had risen about 53% from December 2008 through March 2010, twice as much as gold. Silver is expected to keep beating gold. 

"More and more people are realising the value of investing in silver coins and bullion bars in India," added Jayeshbhai Shah, a bullion retailer at Mumbai's Zaveri Bazaar. "The value of silver has increased rather steadily for the last few years. People who have never invested before are now investing in silver, because they know that buying silver is a great way to ensure that their money is there when they need it," he added.

SILVER JEWELLERY 

"The white metal is now turning out to be the preferred choice for everyday wear, with exquisite silver jewellery on offer, because gold is too expensive. Besides being trendy and contemporary, the metal readily blends with a variety of clothing and other accessories, thereby offering a suite of options to the wearer," said an official at Dhanabhai Export House. 

He added that more and more consumers were looking for traditional or contemporary silver jewellery and were even looking at the white metal for classic business gifts, to be given during the festive season. 

"There are customers who comes to us asking us for heritage art, or even our temple jewellery selection, which is only made in silver. We take great pride in preserving our heritage craft and have several jewellery items that are exact replicas of antique temple jewellery," he added.

During 2011-12, silver jewellery exports grew to 44% as compared with gold jewellery exports of 30%. India is the biggest consumer of white metal jewellery, and has also found a new class of buyers in the West. 

Ketan Shroff, managing director of Pushpak Bullions said investors and jewellery-lovers prefer silver jewellery these days, as gold prices are going up constantly. Silver prices are expected to rise further, if one takes into account the demand potential.

GOLD HIGH

Retailers pointed out that the recent drop in gold prices has sparked off reasonable buying interest in both gold and silver from stockists and retail consumers across the country, given the long wedding season. The yellow metal had plunged to a one month low last Thursday, leading to frenzied buying.

However, analysts added, that after gaining around 16% this year, gold prices are unlikely to cross the $589.44 (Rs 32,000)/10g ($1833) mark in the near term, given the year end profit booking activities. This allows investors to take a better look at silver, in the near term, they added.

Meanwhile, data by GFMS, a Thomson Reuters unit, indicates that the silver markets are in for a surplus. The 2012 surplus is estimated at around 3,000 tonnes even as 2013 surplus is pegged at about 4,000 tonnes, but, of course this doesn’t take investment demand into account (see Silver surplus – what silver surplus?).

Gold and silver prices generally rise when sentiments on the economy and the financial markets are bearish or there is uncertainty over future trends. Retailers point out that silver has also gained from investment demand in the country. There has also been an increase in demand for silver jewellery, due to the fact that gold is becoming out of reach for many.

Source: Mineweb

Wednesday, December 5, 2012

India facing acute shortage of mining engineers

The Indian mining industry is facing a shortage of between 2 500 to 3 000 engineers per year, which is set to worsen if the industry’s contribution to the country’s gross domestic product (GDP) increases, a human resources mapping study conducted by an industry association has found.

The shortage of trained engineers in the mining industry was also being aggravated by demand for mid-level mining professionals from countries like Australia, South Africa, Mauritania and Mozambique, the study said.

While demand for Indian mining engineers in these countries was increasing in tandem with more Indian companies establishing their footprint overseas, Indian mining professionals, particularly those with work experience of between 5 and 15 years, were preferring a variety of assignments abroad owing to the vastly superior compensation packages and the opportunity to work in best-practice environments, the study said, adding that by 2017 the industry would be faced with a shortage of about 8 000 trained mining engineers unless training capacity was urgently upgraded.

Apart from the demand for mining engineers working in domestic industry rising, Indian technical educational institutions were failing to provide the numbers of trained engineers for current and future growth of the mining sector.

According to the All India Council for Technical Education, the advisory and statutory body for the coordination and development of technical education in the country, for an important sector like mining, which had a strong demand for trained engineers, the total number of seats available for students across all training providers in India was just 654 per year.

Engineers fresh from colleges, including those trained in mining engineering, were preferring information technology companies during campus recruitment drives, largely because of the salary structure differential, which was often as high as 60% to 70%, the industry study said.

However, not all agreed that salary was the principal reason for these choices by graduate mining engineers.

“The choice of industry at the beginning of a career is a reflection of our times. Given the vast socioeconomic disparities in our country, it is normal for educated talent to seek urban centres, which the mining sector may not offer, at least in initial years,” said a professor associated with the Indian School of Mines, the leading Indian mining education institute, located at Dhanbad, in the state of Jharkhand, in eastern India.

The Indian mining industry currently contributed 2.3% to the country’s GDP and the government was targeting increasing it to 5% over the next five years. But with the rapid globalisation of Indian companies focusing on acquisition of mineral and energy assets overseas, technical mining education had failed to keep pace with the changing profile of the industry and resultant profile of trained expertise.

“The current mining education curriculum is very traditional and possibly outdated. With rapid developments in the global mineral and energy industries, a vast array of domain knowledge requirements are not being addressed in mining education,” according to an human resource professional at Steel Authority of India Limited.

“With increasing globalisation, cross-border investments, technology transfers and joint ventures in the mining sector, there exists an acute shortage of expertise in mining-related knowledge domains like mineral economics, laws relating to mineral concessions and contracts, financial analysis and forecasting and environmental sciences. These are yet to be mainstreamed in mining education,” he added.

Significantly, India’s second school of mines was being set up in the north-eastern region of the country in collaboration with the government of the state of Queensland, in Australia, which would provide curricula and trainers for the institution.

Edited by: Esmarie Swanepoel

Tuesday, December 4, 2012

India's Adani to begin coal mining in Australia by 2016

India's Adani Group announced the company has completed its exploration in Australia and says they will beging mining by 2016.

The company's Carmichael mine is located in the Galilee basin in Queensland, Australia.

The company is positive that miningwill begin in 2015-2016 and will reach its peak at approximately 60 million tonnes a year by 2022.

The Carmichael mine is estimated to hold approximately 10 billion tons of coal and could be the larges coal deposit in the world.

The company said in a press release "Our partnership with Australia and Queensland has been one of exceptional trust, transparency and understanding. Having seen the speed, and with the support received to undertake and complete the largest and most ambitious mining exploration programme in record time, I am now certain that Queensland has been the right choice. Australian industry and the Indian corporates like the Adani Group have some distinctive synergies, which will prove to be of mutual benefit to all in the long run,"

Wednesday, November 28, 2012

India's coal import bill heading for the sky

India’s coal import bill was standing at $29-billion as the country imported some 245-million tons of coal over the past three years, India’s junior Coal Minister Pratik Prakashbapu Patil said before the Indian Parliament on Tuesday.

However, quick calculations by analysts indicated that India’s annual bill would skyrocket to $18-billion a year by 2017, based on an import requirement of 185-million tons a year and at current international coal prices and a 5% growth in domestic production.

Giving details on imports over the last three years, the junior minister said that in 2009/10 import were 73.2-million tons, valued at $7.06- billion, with 68.91-million tons imported in 2010/11, valued at $7.49- billion, and 102.8-million imported during 2011/12, valued at $14.21-billion.

The analysis pointed out that the forecast increase in the coal import bill should be viewed against India’s worsening current account deficit (CAD), so far majorly attributed by the government and Reserve Bank of India (RBI) to rising oil prices and sustained rise in gold imports.

According to a recent statement by the chairperson of Prime Minister’s Economic Advisory Council, C Rangarajan, India’s CAD rose to $ 78.2-billion or 4.2% of gross domestic product in 2011/12 on the back of increased imports of gold and oil. Gold imports during 2011/12 stood at $62-billion, accounting for over 80% of the CAD, according to government data.

So far the government was seized by trade imbalances caused by gold imports boosting the trade deficit, which in turn increased the CAD and a fallout in the form of a steadily-weakening Indian currency.

However, little attention has been paid to the macro-economic impact of the rising import dependency of the country’s energy security as indicated by a predicted spurt in coal imports, analysts said.

Back-of-envelope calculations revealed that the coal import bill by 2017 would account for 23% of the CAD, as it stands today.  According to Rangarajan, capital inflows into India would be insufficient to cover the CAD.

The trade deficit was at an all time high of $21-billion in October, up from $18-billion in September, resulting from weak exports which has been declining for the past six consecutive months to a negative 1.6% in October, year-on-year.

Viewed against a 40% increase in oil import bill, which stood at $140-billion in 2011/12, India’s increasing import-linked energy security as reflected by cost of imported coal would be a near term macro-economic negative, according to analysts.

Edited by: Esmarie Swanepoel

Sunday, November 18, 2012

India's wedding season to lift gold prices

The wedding season in India increases the country's appetite for gold with several kilos of gold bought and worn on each occasion

Author: Shivom Seth

The wedding season in India is an occasion that demands a much bigger spending spree on gold than any other festive season in the country. Not only is a wedding one of the most precious facets of a person’s life, for the onlookers and visitors to the nuptials, it is an occasion to show off one's jewellery.

Many Indians also use the excuse of a wedding to pander to the wishes of the bride or groom with regards to their preferred gift. Given the fact that gold has yielded positive returns for several years, it is also the most favoured gifting option at wedding times.

Most families and friends offer the new couple gold bars and coins as presents.

With several more auspicious wedding dates lined up end 2012 and through 2013, traders and bullion retailers expect the price of gold to score several new highs.

"Parents these days prefer to buy gold for their children's wedding. Earlier, they would invest in the stock market or even buy real estate. Now, the favourite item is gold,'' said Jayeshbhai Solanki, bullion retailer.

Moreover, while the stock market in India has yielded a gain of around 90% from 2008 to the current period, gold has jumped 136% during the same period.

Gold is traditionally the most popular precious metal investment in India. Most times, brides are often weighed down by their jewellery in a display of wealth and economic status,'' said Solanki.

WEDDING DAZZLE

More than half of the money Indians spend on gold goes to jewellery for the over 10 million weddings held in the country each year.

Though most families which are to have a wedding look out for price dips in the months before to stock up on the yellow metal, Indian buyers are always on the lookout for deals when buying wedding gold, with the price rarely a deterrent.

Gold House owner, Manjul Seth Kakadia, said gold is the safest bet for investments amidst uncertainty in other investment avenues. ``The price of the yellow metal is set to soar in the next few weeks. It has already seen a big jump in India due to high prices of gold across the world and a weakening rupee.''

Kakadia spoke about the sheer retail frenzy that he had witnessed at a wedding mela in Jaipur recently. A mela is a festive retail occasion to purchase goods related to the wedding.

The Pink City, as Jaipur is fondly called, started the whole trend of elaborate `pop up festival buying shops', which entice shopaholics to grab some of the best bargains. "People were buying up chunky pieces of gold jewellery and elaborate gold bangles for the wedding season ahead. Even if all of it cannot be worn, some of it can be handed over as presents to the wedded couple,'' he said.

"Gold will surely shoot to a new high by the end of this year. As India's population gets richer, and one needs to only look at any one Indian wedding to understand how richly, gold demand and consumption is bound to increase,'' Solanki added.

Source: Mineweb

Tuesday, November 6, 2012

India to import more gold this year than earlier thought - WGC

Speaking at the launch of its wedding jewellery brand, Azva, WGC Director Vipin Sharma said the country could import as much as 800 tonnes of gold this year

Author: Shivom Seth

It is not just Indian bullion retailers who are gearing up for the festival of lights in India next week.

The World Gold Council too has noted a significant jump in sales from end-October and early November, in a run-up to the festival.

India's import of the precious metal could be appreciably higher than was earlier envisaged, according to the Council. At a press conference, the global organisation said that India could import around 800 tonnes this year, way more than the 640 odd tonnes that was spoken about earlier this year.

India imported around 933 tonnes during 2011. Despite the fact that the demand for the yellow metal was low for the first half of the year, the Council said it expects the market to pick up momentum in the festival and wedding season, momentum that should continue till the end of the year.

Despite a dip of 8% in the yellow metal's value in the first six months, the World Gold Council has said demand for gold has been ``fairly robust in the long run''.

India has one of the world's highest savings rates, at over 30% - more than double the United States. The bulk of the country's $800 billion in savings is parked in gold.

India and China have continued to dominate global consumer demand, accounting for a combined 45% of total jewellery and bar and coin demand for the second quarter of 2012.

The Council today launched its wedding jewellery brand Azva, inspired by the seven vows, in Chennai, South India. Initially the collection is to be available in the four metros, which will be expanded to 20 other cities of India in a phased manner, Council director Vipin Sharma said.

On November 6, gold prices rose in major metros in India. In the Mumbai market, standard gold was up $4.96 (Rs 270) at $573.66 (Rs 31,220) for ten grams.

Source: Mineweb

 

Tuesday, October 30, 2012

India's Gujarat state almost doubles gold imports in Oct

Author: Shivom Seth

As goldsmiths start stocking for Diwali in India, Gujarat takes the lead by doubling gold imports in October

The state of Gujarat that got its first gold temple in May this year, with gold-plated spires adorning the facade, is again leading the country in gold imports.

While figures from across India show a decline in gold imports, Gujarat has imported 23.7 tonnes of the precious metal in the month to October 25, as compared to 12.7 tonnes in September. The end of the month will have the state exceeding 30 tonnes, ahead of Diwali.

A good demonstration of the state's affinity for the yellow metal is the Gopinathji Dev Mandir temple, some 125 km from Ahmedabad that has been decorated with gold-plated spires. Around 70 kilo of gold worth nearly $11.13 billion (Rs 210 million) was used to plate the spires.

A special event marked the formal opening of the golden temple in May, which sees around 1,500 to 2,000 devotees on a daily basis. On special days, like the full moon, which incidentally falls on October 30, nearly 40,000 people are expected to pay obeisance at the temple.

Elsewhere too, imports of gold are set to rise given the festivities ahead. "There is a lull in prices for the past few weeks. The onset of the festival season has boosted gold and trading is expected to pick up,'' said Manish Shah, bullion retailer and export house owner.

Added diamond exporter Satishbhai Jethamull, "Buyers are looking for avenues to buy gold and the rupee movement has been favourable given the lower calculation in rupee terms."

The World Gold Council had recently pointed out that India's gold imports in the second quarter plunged over 56% to 131 tonnes. With prices having slid from the all-time high of $599.21 (Rs 32,400) per 10 gram in the previous month, customers have come back to retail outlets finding the current prices quite lucrative. Prices of the yellow metal have dipped below $573.43 (Rs 31,000) per 10 gram this month.

Since October 1, gold prices in the international market have lost 3.54% in dollar terms as prices moved from $1,774 per ounce to $1,711 per ounce. In rupee terms, gold moved down from Rs 31,090 per 10 gram to Rs 30,775 per 10 gram, a loss of 1.01%.

Incidentally, gold prices in the last 10 years in Gujarat have moved from $79.54 (Rs 4,300) in 2001 to $541.62 (Rs 29,280) for 10 grams mid-2012. On October 30, the price of gold in the state was up Rs 290 at $578.07 (Rs 31,225) for 10 grams.

With the state recording sales of 500 kilo of gold sold in one day on Akshay Tritiya, any small dip in prices is sure to get the customers flocking to the nearest jewellery store.

Source: Mineweb

Sunday, October 28, 2012

India mulls iron-ore production curb for private miners

Amid the protracted investigations into widespread illegal iron-ore mining in the country, India’s Mines Ministry was mulling the option of imposing production curbs on mines that did not have investments in end-use facilities.

The production curb proposal being considered was in line with a similar action partially unrolled in a few mines in the eastern India coastal province of Orissa, according to an official in the Mines Ministry.

However, the curbs would not be applicable to Indian government-controlled mining companies like the National Development Corporation, better known as NMDC, or mining entities operated by provincial governments since most of these miners were catering to domestic demand, the official said.

The provincial government of Orissa had slapped a production ceiling of 52-million tons a year on the Joda and Koira iron-ore mines and similar caps would be imposed progressively on other mines without end-use facilities.

The Orissa government’s move comes in the wake of on-the-spot investigations into illegal mining in the province by the Supreme Court-appointed M B Shah Commission, which, in its preliminary comments, stated that the extent of illegal mining in the province was extremely complicated and prima facie advocated checks on production volumes to conserve the finite resource.

Officials of the investigating commission have scrutinised 65 mines in Orissa since October 3, concluding that deep-rooted irregularities in mining across the mineral-rich province exist. The commission’s investigations would cover the entire 142 iron- and manganese ore mines in the region.

However, differences have emerged within the government over the desirability and practicality of implementing production curbs, which would in effect be applicable to only private miners.

A section of officials within the Ministry maintained that mandatory production ceilings on private miners would go against the long-term objective of consolidation of the mining sector and development of large diversified resource companies through greater foreign direct investment in the mining sector, as was seen in the global mining industry.

Industry analysts in the Ministry also pointed out the impracticality of an across-the-board production curb irrespective of grades of iron-ore mined.

For example, the western Indian province of Goa, the second-largest producer of iron-ore in the country, until the recent complete ban on mining, produced 50-million tons a year, which is entirely shipped out through exports. The entire production of ore mined in Goa was of a low grade and unsuitable for consumption by domestic steel mills and the imposition of end-use conditions on such mines would, therefore, not serve any purpose, officials noted.

At the same time, the long-term objective of greater use of low-grade ore for domestic consumption through higher investments in beneficiation and pelletisation would not be achieved through production curbs since the small and fragmented miners would not immediately have the financial wherewithal to set up facilities for value-addition to the mined ore, analysts opposing the curbs said.

Following the ongoing Supreme Court-mandated investigations and clampdown on mining, India’s iron-ore production was down 19.65% in 2011/12 at 167.11-million tons compared with 207.99-million tons in the previous year. Export of ore were down 41.78% at 57-million tons in 2011/12 compared with 97.90-million tons in 2010/11. In 2012/13, Indian iron-ore production was forecast to fall further to levels of around 140-million tons.

Edited by: Esmarie Swanepoel

Wednesday, September 26, 2012

China and India needed for current gold spark to ignite

Reuters market analyst Clyde Russell says for gold to extend its current rally into a move beyond $2,000, it will more than likely need the support of the physical market and this means more buying by China and India.

There's no doubt that gold has been boosted by the latest round of U.S. quantitative easing, but the question remains as to whether this is the start of a sustained rally or just a flash in the pan.

Certainly, there is no shortage of gold bulls saying the precious metal is once again poised for significant gains. Their argument is centred on gold's investment appeal being burnished by monetary debasement in the United States and Europe, coupled with fears of inflation in years to come.

Add to this the possibility of increased demand from top consumers India and China as their respective festive seasons get underway in the fourth quarter and the case for gold looks quite constructive.

However, gold's gains since the U.S. Federal Reserve announced its third round of quantitative easing, or QE III, have been somewhat muted.

Spot gold has risen just under 2 percent from its close prior to the Sept. 13 announcement, but is up 9.3 percent from the end of July, around the time that QE III became more of a likelihood.

But gold is still more than 8 percent shy of its record high of $1,920.30 an ounce, reached on Sept. 6 last year.

While a return to the all-time peak can't be ruled out, it's hard to see how it can alone be achieved on the back of quantitative easing in the United States and the bond-purchase guarantee offered by the European Central Bank.

For gold to extend its current modest rally into a move beyond $2,000 an ounce, it will more than likely need the support of the physical market and this means more buying by consumers in China and India.

And this is where the biggest question mark must be placed, notwithstanding the likely seasonal gains.

Gold demand has plunged in India on the back of new taxes, a weaker currency and slower economic growth.

India's gold demand dropped to 181.3 tonnes in the second quarter, down a massive 38 percent from a year earlier and 13 percent from the first quarter, according to data from the World Gold Council.

China is likely to overtake India as the world's top buyer of the precious metal, but even here the picture has been mixed as lower inflation eroded some of gold's investment appeal and, similar to India, consumer demand eased along with economic growth.

China's demand was 144.9 tonnes in the second quarter, down a huge 43 percent from the first quarter, and if second-half demand matches the first, it will total about 800 tonnes for the full year, only 29 tonnes more than 2011.

This certainly not enough to offset the loss of about 184 tonnes of gold demand in India, assuming second-half demand in the South Asian nation matches that of the first half.

There is a fairly strong correlation between gold demand and price over the past couple of years, once seasonality is taken into account, but this has broken down significantly since the beginning of the year.

Using quarter-end gold prices and demand figures from the World Gold Council shows that the demand/price ratio was 1.29 at the end of the third quarter in 2010.

This was more or less steady to the third quarter of 2011, when it stood at 1.33, as gold's rally was matched by increasing demand.

However, gold demand has now fallen since the third quarter of last year, outpacing the slip in prices since the record high of September 2011.

The ratio of demand to price in the first quarter of 2012 was 1.52 and 1.60 by the end of the second period.

Since the third quarter of 2010 the ratio has averaged 1.39, or 1.34 if the first two quarters of this year are excluded.

For the ratio to return to the average would take an enormous increase in physical gold demand, which is unlikely to have happened in the third quarter or eventuate in the fourth.

Even if third-quarter gold demand this year was the same as the record high achieved in the same period in 2011, the ratio would still be 1.44, using the current gold price.

This is still elevated in historical terms, and the exact ratio is likely to be higher as it's hard to see a more than 200-tonne leap in gold demand from the second to third quarters this year.

While China's gold consumption may have gained, given that Hong Kong's exports to the mainland nearly doubled in July, it's still unlikely to have recorded the kind of jump needed to bring physical demand back into correlation with the third-quarter price gains.

It's the same story for India, with imports likely to have improved in the third quarter as the rupee gained strength, but unlikely by enough to give a physical platform to gold's rally.

The run-up to last year's record high in gold was driven by both physical demand and inflation-hedge, or safe-haven demand, as well as central bank buying.

Right now it appears central bank buying remains solid, investment demand has picked up with a 6 percent gain in holdings by exchange-traded funds since the end of July, but it remains to be seen if Indian and Chinese demand has improved.

If it has, then the case for a gold rally may be complete, but if the third quarter growth in the world's top two consumers is modest, then gold's rally will look shaky.

Source: Reuters

Monday, September 24, 2012

China denies it is "gobbling up" India's iron ore

An exhaustive report into illegal mining in the Indian state of Goa has also accused China of using up all of India's iron ore reserves.

The China Iron and Steel Association has rejected assertions that it is to blame for "gobbling up India's iron ore reserves" while, at the same time strategically choosing not to mine its own deposits of the metal.

The charges were laid at the feet of the Asian giant by a report into illegal iron ore mining in Goa by the Justice M.B. Shah Committee. The report, which pegged Goa's mining scam at nearly $6.5 billion, also noted that ``China had strategically stopped short of tapping its deposits of 200 billion tonnes''...and suggested that the ``Central government should consider banning exports of Indian ore.''
It added, ``Planning and conservation of iron ore for at least 50 years is required for Goa so that future generations may not be required to import entire steel from China and likewise countries.''
The report added that while India was exporting ore to China, China was exporting steel back to India and had stopped tapping its domestic deposits. ``It would not be out of context to state here that China...prefers to import from countries like India and others. The ministry of mines, steel, commerce and industries have to sit together to give serious thought for banning export or in the alternative to permit minimum export of iron ore from the country.''
Ms Qu Xiuli, a deputy secretary general of the CISA, told a local news website that China's crude iron ore output has been rising by 20% annually. She said that, ``The CISA encourages exploitation of domestic mines, and aims to reduce imports to bring the price of iron ore under control.''
She added that China's imports of iron ore from India have been declining.
Imports from India have declined since the beginning of 2012, following a rise in Indian export duties to 30% on December 30, 2011 from 20% earlier.
China, on the other hand, imported 62.45 million metric tonne of iron ore in August, up 6% year on year, and 8% month on month, data released by the General Administration of Customs of China over the weekend showed.
A report from LGMT Research, a market consulting firm for the steel industry, had also noted that Indian iron ore took up around 11% of China's overall imports of iron ore in 2011, a decline from 15.6% in 2010. The report has highlighted that the decline was a consequence of the hike in export duties imposed by India in recent years.
Moreover, boosted by a slew of infrastructure projects in China and a new round of quantitative easing by the United States, prices of imported iron ore at 25 major ports in China increased during the week ending September 17 from the previous week.
Furthermore, iron ore stockpiles stood at 101.51 million metric tonnes, down 370,000 metric tonnes week on week. The price rebound far exceeded market expectations due to investment projects announced earlier this month by the country's top economic planner.
Authorities in China have approved 55 investment projects worth $157.7 billion (1 trillion yuan)) to build highways, ports and railways across the country.

Friday, July 13, 2012

India’s central bank looks to reduce gold imports

The Reserve Bank of India (RBI) was planning to introduce a financial instrument to match returns from investment in gold in a bid to check skyrocketing gold imports into the country.

Gold imports were being discouraged, as it was a substantial contributor to the country’s current account deficit, a senior official of RBI said.

While it would be very difficult to match the returns from investment on gold, the RBI would do its best to offer attractive terms through the proposed financial instrument, he added.

Quoting data from World Gold Council (WGC), he said that 23% of all gold imported into India was for investment purposes and even the use of the balance 75% for jewelry was largely driven by investment objectives.

India imported some $60-billion worth of gold during 2011/12, while the country’s current account deficit touched an all time high of $21.7-billion or 4.5% of gross domestic product (GDP) in January/March 2012 compared to $6.3-billion in corresponding period of previous year.

Some of the largest importers of gold were Indian commercial banks, which imported gold coins for domestic retail sales.

Expressing concern over the trend, the RBI has noted that banks’ import of gold had increased from1% of total imports in 2009/10 to 3.8% of total imports in 2011/12. India, the world’s largest importer of gold, shipped in 950 t of the metal in 2011/12. To put in perspective, crude oil constituted 31% of India’s total imports, while gold imports accounted for 12.6%.

The RBI has informally asked commercial banks to slow down the import of gold coins but given the retail demand for the product, commercial banks have not heeded the advice. The RBI has now formed a committee headed by an executive director to suggest measures to phase out import of gold coins by commercial banks.

However, on a note of caution, a commercial banker said that supply-side measures to check import of gold would have limited impact with risks of pushing the trade underground and increase in black market rates.

The Indian demand for gold was sociological driven by festivities and marriages even though gold had emerged as a preferred investment for the large middle class and government and RBI initiatives should be focusing on financial literacy to reduce interest in `dead asset like gold’ he said.

According to the Bombay Bullion Association, Indian import of gold during the next six months could rise by 20% at 300 t, riding on the festive and marriage season ahead.

Edited by: Esmarie Swanepoel

Monday, June 25, 2012

Asian demand for diamonds set to boom

While in the short term, demand for diamonds globally is struggling, analysts say demand from China and India is set to far outpace the annual 2.8% supply growth.

India's diamond exports crashed by more than 44% in May as compared to a year ago period, sparking off panic in the diamond cutting and polishing industry. Though imports of rough diamonds also fell 20% in May, the country's rough diamond imports had jumped 20.3% the month before, in April.

The ``unexpected increase'' in April came under intense scrutiny from government officials, especially since the polished diamond trade was flat at that time. Diamantaires told the visiting regulatory officials that demand for diamonds in India and China is set to far outpace supply, which is limited to production at a small number of mines worldwide.

"The demand for diamonds is set to boom. There is no doubt about this. It will be driven primarily by the growth of the markets in China and India,'' said Maneesh Dhukaje from Hare Krishna Exports, a diamond trading firm.

In India alone, he noted, the market for diamonds is expected to grow faster than that for gold over the next five years, with some estimates pegging it at 1 trillion rupees. During the same time, India and China are expected to represent half the global growth in demand for diamonds.

Meanwhile, at the Hong Kong Jewellery and Gem Fair that concluded last week, some strain was evident in the business community, with most Indian dealers speaking about the external factors that had influenced the market. Traders also referred to the `silence' from the US market, which remains the biggest market for diamond jewellery in the world.

However, demand for light-weight diamond jewellery by China and India's rapidly expanding middle class consumers could counterbalance the expected drop in demand from key markets, traders added.

Consulting firms also have predicted that prices of rough diamonds are set to rise between 3% and 10% due to demand from emerging markets like China, India, Hong Kong and UAE, given the gradual decrease in global production of rough diamonds.

Traders said demand for diamonds is on the rise in India with the affluent class wearing more of them as a style statement and the middle class consumer shifting to the 16-18 carat gold diamond studded jewellery style that is most preferred in the major metros.

Diamond jewellery with low carat gold also appears to have found pride of place in smaller areas and districts of India, especially in Tier-II and Tier-III cities.

"People in these smaller cities are going for 14 carat diamond jewellery sets and even 12 carat sets to suit their shoe-string budgets instead of the usual 18 carat diamond studded jewellery pieces,'' said Dhukaje.

He added that the demand for diamond necklaces and bangles was especially on the rise in smaller cities.

The Indian diamond industry imports rough stones which are cut and polished within the country before they are exported. This part of the business took a major hit in May this year. According to data released by the Gems and Jewellery Export Promotion Council, exports of cut and polished diamonds fell from 51,22,000 carats in May 2011 to 25,74,000 carats in the corresponding period of this year.

In value terms, the fall in exports was from $2,240 million to $1,245 million in the same period. The decline in May was steeper than in April this year, which saw exports decline 35% in terms of value as compared to April 2011.

Diamond traders are blaming the fall in exports to the imposition of a 2% import duty on cut and polished diamonds on January 17 this year, which most traders say has resulted in a dramatic reduction. India's polished diamond exports for fiscal 2011-12 slipped by 17.3% immediately thereafter, say traders.

"At the start of January this year it was a completely different scene. Net polished diamond exports, which is the excess of exports over imports, was recorded at $828.35 million in January 2012, which was a considerable increase considering that the there was a deficit of $84.17 million in January 2011. Net rough diamond imports, which is imports less exports, also rose by 3% to $940.82 million,'' said Shashi Jariwala, diamond trader and exporter.

"Though margins are lower, cut and polished diamonds are imported for the purpose of value addition,'' he added. India imported $1.58 billion worth of roughs in April, up 8.4% as compared to March. The volume of imports also increased, up 42.2% to 14.2 million carats. The average value of imports totalled $111.41 per carat.

Wednesday, June 20, 2012

China takes up India's gold buying slack

Consumers made the most of the dip in the price of bullion and mainland China's gold purchases via Hong Kong hit a record 101.7 tonnes in April, up 62%, according to figures released by the Hong Kong government and reported by Reuters.

Quarterly data from the Hong Kong census and statistics office showed the Middle Kingdom also exported much more gold – 34.3 tonnes of the yellow metal found its way back to Hong Kong bringing the net imports to 67.4 tonnes.

China's imports hit a record of 102.5 tonnes in November 2011 and for the whole of last year net imports were 380 tonnes, up from the roughly 120 tonnes in 2010.

The Wall Street Journal explains why gold is such a popular investment in China:

“Inflation [in China] is high and there is a low chance to invest in property and little desire to participate in the stock market. But disposable income is rising and people want to protect their wealth,” said Helen Lau, a senior metals and mining analyst at securities firm UOB Kay Hian.

China's renewed appetite for gold is in contrast to India, historically the number one global importer of the metal. The number one reason for the drop-off in demand is a rapidly weakening currency.

This year the rupee has devalued sharply lifting gold in the local currency to record highs of over 30,000 rupees per 10 grams.

India’s gold demand is expected to fall by 4% in volume in 2012 according to a new Morgan Stanley survey. India imports between 800 to 1000 tonnes of gold each year.

Indians already own 20,000 tonnes of gold worth $1 trillion – that's about half the GDP of the nation.