It's turning into one of the biggest soap operas in natural resources. The "will they, won't they" question of gold imports into India.
A few months ago, it looked like things were clearing up for India's gold space. With the election of president Narendra Modi widely expected to cause a cut in import taxes. Which in turn would spur an uptick in bullion purchases here.
But the decrease in taxes didn't materialize. With India's government maintaining import duties at 10%--a level that's caused total imports to plunge by more than 80% in some recent months.
And this week the government finally gave an update on the gold situation. Saying it doesn't plan to make any drastic moves soon.
Local press reports that the nation's Trade Minister Nirmala Sitharaman is against any cuts to import taxes at the moment. With the Minister saying that "immediately, there is no plan to reduce import duty."
That's one of the first public comments on the gold policy in some time. Suggesting that investors will have to wait for any lift in the gold market here--with higher taxes likely to keep gold consumption dampened over the coming months.
This is of course a critical observation. It's not easy to overstate the importance of India when it comes to the global bullion market. This being the second-largest buyer of gold on the planet, after China.
Notably, India's wedding season is set to kick off soon--beginning in late September and running through to January. A time when gold buying in the country is usually at its apex.
Last year, taxes made even this period a muted one in terms of overall demand. So we'll see if there's any notable jump in purchases as these dates approach.
Stay tuned for further updates on this front.
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Here's to watching for the cuts,
Dave Forest
