As we all have seen — over the course of time —the market does what it wants. That age-old trader saying is proving out again, this time for gold demand in India. The year 2017 started with concerns that India would impose a huge new tax rate on gold.
This was expected to reduce gold demand from India. Instead we got almost exactly the opposite – the new rate of 3% is just slightly higher than the old central rate, and the legislation eliminated some other possible tax layers. Possibly. Indications are that many business owners are confused by the new tax legislation.
Doubtless trying to reduce their risk, manufacturers and storeowners restocked heavily in June, driving up gold imports to an estimated 75 tonnes from 22.7 for this period last year. If the estimate is correct, total imports for 2017 are up 161% over the first half of last year.
What remains to be seen is whether demand will continue or if the surge in buying is simply business people doing their buying earlier. Typically India marriage season demand starts in the early weeks of August. So we probably won’t know for a few months whether this is a new level of demand, or they’ve robbed August to pay May.
World gold prices aren’t reacting on this news so it’s best we don’t go getting all excited quite yet. But as India’s marriage season is one of the largest retail demands for gold we will surely keep an eye on the situation.
Signed, The Gold Enthusiast
DISCLOSURE: No specific securities were mentioned in this article. The author is long NUGT and JNUG and may add to or sell these positions in the next 48 hours.