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India holds off on gold imports as new rules cause uncertainty
July 30, 2013 / 11:17 AM / 4 years ago

India holds off on gold imports as new rules cause uncertainty

* Premiums soar to $45 an ounce
    * Imports in July could have reached 45 to 55 tonnes -trade
    * Dealers not ready to import and store gold -bank official

    By Siddesh Mayenkar and A. Ananthalakshmi
    MUMBAI/SINGAPORE, July 30 (Reuters) - India's imports of
gold have halted since July 22, sending premiums for scarce
stocks soaring, as traders in the world's biggest bullion buyer
try to puzzle out new central bank rules that tie imports to
export volumes.
    In its battle to rein in a record trade deficit, India has
targeted gold, the second-biggest item in its import bill after
crude oil.
    India doubled its import duty to 8 percent from the 4
percent where it stood at the beginning of the year, and also
requires a fifth of all gold imports to be used for export,
usually in the form of jewellery. 
    June imports fell nearly 81 percent to 31.5 tonnes from a
May record of 162 tonnes, although Finance Minister P
Chidambaram said on Monday imports had risen again in July, but
without giving any details.
    "There have been no imports since July 22 (the day of the
central bank announcement) due to these restrictions," Bachhraj
Bamalwa, director of trade body the All India Gems and Jewellery
Trade Federation, told Reuters.
    Imports in July could have reached 45 to 55 tonnes, he said,
implying that demand remains strong.
    "Premiums are increasing as there is no gold available," he
    Traders were quoting a premium of up to $45 an ounce over
London spot prices on Tuesday, up from $25 to $30 in the
previous session.
    "No one in India is able to import for now, due to the new
regulations and a lack of clarity on the operational
procedures," one trader in Singapore said.
    The confusion over the new rules and procedures could cut
imports by 60 percent, according to estimates by the Federation,
just ahead of the peak wedding and festival season that usually
kicks off around the middle of August.
    Industry officials said import agencies were waiting for
guidelines from Indian customs on clearing shipments through 
warehouses and the new export-linked policy on imports.
    In the new scheme, importing banks and agencies have to
ensure that the requirement for re-exports is met.
    "The notification requires a lot of clarifications," said an
official with a private bullion importing bank, who did not want
to be identified because he was not authorised to speak to the
media. "No bank has started importing (after the Reserve Bank of
India's order)."
    Dealers are not ready to import gold and store it, he added,
with only imports for immediate sale expected to take place at
the moment. 
    A Singapore-based trader with an international bank that has
stopped shipping to India said the new guidelines and the
central bank's flip-flop on a rule that had forced only cash
deals for imports were sending mixed signals.
    In May, India's central bank restricted the import of gold
on a consignment, or credit, basis by banks, only to backtrack 
two months later.
    "We don't want our stock to get stuck there. So we would
rather stay put at this stage," the trader said. 

 (Reporting by Siddesh Mayenkar in Mumbai and A. Ananthalakshmi
in Singapore; Editing by Clarence Fernandez)

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