| MUMBAI, June 24
MUMBAI, June 24 India's biggest jewellers'
association has asked members to stop selling gold bars and
coins, about 35 percent of their business, adding its weight to
government efforts to cut gold imports and stem a swelling
current account deficit.
The call by the All India Gems and Jewellery Trade
Federation (AIGJTF), which represents about 90 percent of
jewellers, comes just days after financial services company
Reliance Capital halted sales of its gold-backed funds.
"As a responsible trade body, we have requested our
retailers not to sell gold coins or bars. We need to help the
government to solve the CAD (current account deficit) problem,"
said Haresh Soni, chairman of the AIGJTF, which has more than
India is the world's biggest gold buyer, and soaring imports
have sent its current account to a record deficit. New Delhi has
raised the import duty on gold twice since Jan. 1, doubling it
to 8 percent, and the central bank has imposed measures forcing
customers to pay up front for gold.
"We have appealed to members not to sell coins and bars till
our CAD situation resolves," Soni said.
"We expect 1,500-2,000 retailers to stop sale of gold coins
and bars immediately," he added.
About 30 to 35 percent of last year's imports of 860 tonnes
went into investment demand, Soni said. Most of the gold
imported into India goes into making gold jewellery,
traditionally part of a bride's trousseau and dowry.
"We are safe guarding the jewellery industry ... (which)
generates employment and creates revenues for the government,"
On Monday, shares in listed jewellers such as Gitanjali Gems
Ltd and PC Jeweller Ltd fell sharply on
concerns the government measures could hit their businesses.
Soni said the federation had asked the government to reduce
the import duty from 8 percent to 4 percent.
Falling world prices from mid-April triggered a surge in
demand globally. India's imports hit a record of 162 tonnes in
May, more than double the average monthly import level in 2011,
a record year.
The government's and central bank's latest actions to curb
buying came earlier this month, and Soni said imports in June
had declined drastically. He declined to give specific figures.
Finance Minister P. Chidambaram said last week imports had
fallen in value to about $36 million a day from $135 million
before the curbs.
But the World Gold Council (WGC) estimated imports could
still be 300-400 tonnes in the second quarter - almost half the
total for 2012 - and the government itself said imports had
exceeded 300 tonnes in April to mid-May.
Domestic prices are already back near levels before the rise
in the duty, which indicates demand could revive, particularly
as a bountiful monsoon starts to raise hopes of increased
incomes for farmers and India's large rural community.
On April 16, domestic gold futures hit a contract
low of 25,270 rupees ($430) per 10 grams, and they are now
trading around 26,734 rupees.
The WGC said it expected 2013 demand - largely covered by
imports - to be "at the higher end of our estimate of 865 to 965
tonnes", which would be close to the record 969 tonnes of 2011.
"Demand in India is price inelastic ... the fundamental
reasons for gold demand in India cannot be addressed through
supply restrictions," said Somasundaram PR, managing director
for India at the WGC, in an email.
The WGC last month said 82 percent of Indian consumers in a
survey said they thought the price of gold would increase or be
stable in the next five years. Many Indians see gold as a sound
investment in a country that lacks any kind of comprehensive
banking system and with real interest rates stubbornly low.
Over centuries, Indians have squirreled away at least 20,000
tonnes of gold - more than is stored in the vaults of the U.S.
Federal Reserve - in their quest for a safe investment.
($1 = 59.1750 Indian rupees)
(Editing by Jo Winterbottom and Jane Baird)