I know I’ve used this headline before. I’m hoping that last time was in 2013.
But there’s little doubt that the developments that emerged yesterday are key to the future of bullion prices. Coming in one of the most critical gold-consuming centers on Earth.
India.
The big news there is an announced easing of gold import restrictions. Which will broaden the range of entities allowed to bring bullion into the country for domestic consumption.
The Reserve Bank of India said it will now allow a range of private trading houses to start importing gold. Since mid-2013, such groups had been banned from facilitating imports–with such shipments being restricted to a group of select banks.
The new rules will reportedly be effective immediately.
These trading groups will still be subject to the so-called “20:80 scheme”. Another measure introduced to curb gold imports–where 20% of imported gold volumes must be dedicated to re-export.
But despite the curbs still in place, this week’s changes are a major step forward. Signalling that Indian policymakers feel the country’s fiscal problems are behind them. And thus gold imports can once again start to be normalized, without endangering the current account deficit or the value of the rupee.
The numbers bear that sentiment out. India’s current account balance is estimated to have fallen 65% in the year ended March 31–to around $32 billion, down from over $88 billion in the previous year.
The rupee has also been strengthening. Up 15% since August 2013.
Given all of these positives, it appears we may see further opening of the Indian gold market ahead. With this week’s changes being the first step in returning the nation’s bullion sector to normal.
That would be a huge boost for global gold buying–and prices. The last few quarters have seen India’s bullion imports down by hundreds of tonnes as compared to previous years. Should this demand return to the market, it will almost certainly have a marked effect.
