The World Gold Council (WGC) launched a report titled \u2018Bullion Trade in India\u2019, as part of a series of in-depth analysis on the Indian gold market. The report highlights how, with very little mining and modest levels of recycling, India is heavily reliant on bullion imports to meet its domestic demand. Indian official imports have continued to grow despite high import duty, with official imports averaging 760 tonnes since the first duty hike in 2012.<\/p>\n\n\n\n
The higher import duty has led to increase in unofficial imports with the east\/north-east and south states acting as main channels for gold smuggling. Gold smuggling also have shifted away from sea in favour of air and land routes, WGC noted. The last decade witnessed an increase in dor\u00e9 shipments due to lower duty applicable on it.<\/p>\n\n\n\n
Somasundaram PR, Regional CEO, India, World Gold Council, said; \u201cAs the second largest global market, Indian gold demand is heavily dependent on bullion and dor\u00e9 imports. Bullion industry has developed over the last 3 decades in India with significant addition to organised refining capacity and an LBMA accredited refinery. Challenges remain, however, on dor\u00e9 sourcing and organised trading which act as barriers to a more active role for banks and bullion trade in global trading and price setting. High taxes on bullion continue to be a strong incentive for the grey markets that constantly undermine all reforms to make gold liquid and mainstream. There are significant opportunities to emerge as a global bullion trading hub through the international gold spot exchange (IIBX) with a thriving domestic bullion eco-system underpinned by globally recognised standards and infrastructure.\u201d<\/p>\n\n\n\n
Key highlights of the report:<\/p>\n\n\n\n
Indian official imports<\/p>\n\n\n\n
\u2022 <\/ins>Over the five-year period 2016-2020, imports made up 86% of India\u2019s gold supply, while recycling accounted for 13% and mining accounted for just 1%.<\/p>\n\n\n\n \u2022 Since the first duty hike in 2012, India has imported some 6,581 tonnes of gold, averaging 730 tonnes per annum.<\/p>\n\n\n\n \u2022 Higher gold imports can have a negative impact on the country\u2019s balance of trade and have, at times, led the government to implement measures to try to curb gold imports<\/p>\n\n\n\n Gold trading volumes<\/p>\n\n\n\n \u2022 In 2020, the average daily trading volumes on futures and spot exchanges was $69.3 billion, with gold ETFs generating average trading volumes of $3.3 billion.<\/p>\n\n\n\n \u2022 India\u2019s contribution to these was just $1.2 billion and $3.4 million respectively.<\/p>\n\n\n\n Gold Dor\u00e9 imports<\/p>\n\n\n\n One important change that has taken place in India\u2019s gold market is the growth in gold dor\u00e9 imports. The increase in dor\u00e9 imports reflects the government\u2019s accommodative stance towards gold refining.<\/p>\n\n\n\n \u2022 In the last five years, gold dor\u00e9 imports made up 30% of total official gold imports.<\/p>\n\n\n\n \u2022 The duty benefits also led to a massive expansion of refining capacity in India, with the number of refineries growing from three in 2012 to 32 in 2020.<\/p>\n\n\n\n \u2022 Currently, some 25-26 refineries are active, with a combined refining capacity of 1,200-1,400 tonnes.<\/p>\n\n\n\n \u2022 Of these, 23 refineries imported dor\u00e9 in 2020 and the top five refineries accounted for more than 70% of India\u2019s dor\u00e9 imports.<\/p>\n\n\n\n \u2022 With lower duty on gold dor\u00e9, the share of gold imports has increased from 11% in 2014 to 29% in 2020. <\/p>\n\n\n\n Official import trends<\/p>\n\n\n\n \u2022 In 2020, India imported 377t of gold bars and dor\u00e9 from over 30 countries – 55% of the imports came from just two countries \u2013 Switzerland (44%) and the UAE (11%)<\/p>\n\n\n\n \u2022 As dor\u00e9 imports have grown, refineries have become far more prominent importers, achieving a 29% share of India\u2019s official imports in 2020.<\/p>\n\n\n\n \u2022 With bullion banks like Nova Scotia exiting their precious metals business and many large bullion dealers (previously clients of the banks) setting up their own refineries, banks\u2019 share of official imports shrunk from 40% in 2017 to 19% in 2020 as the business shifted to refineries.<\/p>\n\n\n\n \u2022 About two-thirds of imported gold is in the form of 995 cast kilobars or 100g bars. 999 purity bars account for much of the remaining one-third of imports.<\/p>\n\n\n\n \u2022 Over the last few years, 100g bars have gained in popularity, with increased demand from small dealers or manufacturers.<\/p>\n\n\n\n Key Import locations<\/p>\n\n\n\n \u2022 Gold officially shipped into India comes via air into 11 cities. In addition to these cities, gold is also imported in Sri City FTWZ, located in the town of Satyavedu in the State of Andhra Pradesh.<\/p>\n\n\n\n \u2022 In 2020, 84% of imports came through airports located in North and South India, with the remaining 16% coming through airports in West and East India.<\/p>\n\n\n\n Bullion banking in India<\/p>\n\n\n\n Bullion banking is a catalyst for change in India\u2019s gold market landscape. India\u2019s gold market faces multiple challenges, such as a lack of quality assurance, the unorganised state of the market and a lack of trust in international markets. Bullion banking is one of the key pillars to address these challenges and help establish India\u2019s position among leading global and regional markets.<\/p>\n\n\n\n \u2022 Greater access to the bullion market for banks and other financial institutions: Banks could have greater access to the bullion market, including gold spot and derivatives trading. Banks could be encouraged to pursue product innovation and attract retail participation in the bullion market. With bullion banking, insurance companies could offer gold and gold futures products to customers<\/p>\n\n\n\n \u2022 Boosting essential policy reforms: Bullion banks can make a meaningful contribution to other gold-related reforms:<\/p>\n\n\n\n \u2022 Increased liquidity for bullion trade: The set-up of bullion banking could increase liquidity for bullion trade through:<\/p>\n\n\n\n The World Gold Council (WGC) launched a report titled \u2018Bullion Trade in India\u2019, as part of a series of in-depth analysis on the Indian gold market. The report highlights how, with very little mining and modest levels of recycling, India is heavily reliant on bullion imports to meet its domestic demand. Indian official imports have…<\/p>\n","protected":false},"author":1,"featured_media":13052,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[83],"tags":[],"thb-sponsors":[],"class_list":["post-13050","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-bulletin"],"acf":[],"yoast_head":"\n