Union Budget 2019

It’s an important week for gold, both internationally and in the domestic markets. Amidst the Fed chaos, our very own budget got overshadowed.

Many suggestions have been made to the government, for the better of the Gems and Jewellery industry.

The government had increased the import duty on gold in order to narrow the trade deficit.  But in the lead to do so, unknowingly it has also led to an increase in gold smuggling. The gems and jewellery sector has sought a reduction of gold import duty to 4 percent, cut and polished diamonds and cut and polished gemstones to 2.5 percent and relaxation of credit norms for working capital requirements in the forthcoming budget.

Furthermore, elimination of CTT tax has been proposed in order to curb dabba trading.
These and many other suggestions related to import duty, taxes, infrastructure, R&D and precious stones duty has been made to the government.

The stakeholders expect that the government will accept these or at least amend the current norms in favours of everyone.

The upcoming interim Budget will likely offer a fresh push to gold schemes, laying out plans to tweak existing ones and announce new products, as earlier efforts to draw people to park their idle holdings with banks yielded little. A comprehensive gold policy is being planned.

This is an election year so it (the government) will is expected to put in more money into hands of people. There will be a big amount of spending in a short span that would be good for gold. Before the election, Prime Minister Narendra Modi's government could announces measures to help the nation's farmers, the biggest buyers of gold.

Keeping the bigger picture in mind, many new suggestions have been made, such that it creates a win win situation for the government, the jewellery industry and the end consumer. 

Budget views 2017

From the previous budget to this year’s- Gold witnessed some key events in the domestic market.

They varied from politics to economic to geopolitical. Namely-

Demonetisation

Prime Minister Narendra  Modi made the surprise announcement on 8th November 2016 that the 500 and 1000 Rupees are just “worthless piece of paper”. The 500 and 1000 Rupees notes have been banned to fight back money and money-laundering. The new 2000 and 500 Rupees notes were released on 8th November 2016. The aftermath of demonetization, banks and ATM across the country faced severe cash shortages.

Goods and service bills passed

Goods and Services Tax bill were passed on 8 August 2016. GST is a proposed system of indirect taxation in India merging most of, the existing taxes into a single system of taxation. It would be a comprehensive indirect tax on the manufacture, sale and consumption of goods and services throughout India, to replace taxes levied by the state and central governments.

Surgical Strike Against Pakistan

The Indian said that it had conducted “Surgical Strikes against suspected militants in Pakistani-administered Kashmir on 29 September 2016. Lt Gen Ranbir Singh (DGMO) said that it had received “very credible and specific information” about “terrorist teams” who were preparing to “carry out infiltration and conduct terrorist strikes inside Jammu and Kashmir and in various metros in other states”. The Indian action was meant to pre-empt their infiltration.

But of the ones mentioned above gold was majorly affected in the year end by the announcement of demonetisation scheme.

Gold has been a beneficiary and even a victim of demonetisation. On a net basis, this demonetisation exercise as of now has been neutral for gold. As the demonetisation alarm bells rang, the rush to buy gold was almost immediate. As media reports suggest and also confirmed by gold import numbers, a lot of gold was sold on the night of November 8, as many rushed to buy gold with old notes. Post that, as the cash crunch hit the economy, there was a significant decline in discretionary spending including gold.

In many of our pre budget expectations over the past few years, we have always proposed to make the gold industry more organised. Fortunately, the demonetisation scheme, launching of a gold scheme and making PAN number compulsory for purchases of gold jewellery worth more than Rs 2 lakh shows the seriousness of government in making the making gold a commodity and thus channelizing it into a more organised way.These are signs of positive policy

After a neutral financial year for gold industry in India, all eyes were on the Finance Minister for the budget that was presented today- Feb 1st. This date marks the change in previous customary budget schedules which usually took place at around the end of February, usually February 28. The gold industry was hoping for a change from last few years of high import duties to a more reduced levy.

The industry was expecting a reduction in duty not onlyfor the interest of the dealers but also for the good of the common man.

However, there was no such announcement and duties have been unchanged. The budget is neutral for the gold industry and overall positive. On a scale of 1 to 10 I would rate this budget as 6.5.

#SaluteModi : RSBL

This was one of the boldest movements by the Government of India announced over a 40-minute speech. In one of the historical reforms of the economy of India, Rs 500 and Rs 1,000 notes were banned effective Tuesday midnight which is expected to bring in 7 lac crore in the RBI account.

The entire team at RiddiSiddhi Bullions ltd. supports this brave move of Our Respected PM Mr. Modi. We assure complete support for the successful implementation of these measures to fight corruption and illicit financial flows in India.  The majority of industry and commoners alike reacted to this decision with overwhelming support and we at RSBL will extend total cooperation for it. Our aim is to have a "black money free India".

5 YEAR (2011-2016) POST DIWALI ANALYSIS: RSBL

 By Mr. Prithviraj Kothari, MD, RSBL

Buying gold and silver is considered to be auspicious in most of the festival especially on Akshay Tritiya, Dussehra, Dhanteras and Diwali. Even jewellers project gold in different manner during festival season.  Jewellery houses offer attractive discounts and other such schemes to lure the customers. Some have gone a step further and are offering discounts on the making charges as well.

We usually hear in advertisement that “Diamond is forever” but for Indian market if we see craziness about gold than for us “Gold is forever” seems to be the apt statement.

A historical analysis shows that largely on the day of Diwali, gold prices witness a correction, while the price increase actually takes place around two weeks prior to the festival.

Generally I have always been asked what are your projections for Diwali, how does the market look etc. But this year I have put across a post Diwali gold analysis from 2011- 2016. Let’s have a look.

                   

Diwali 2011- Gold prices ended steady at INR 31,300 per ten grams in special Diwali trading on 26^th October,  on selective buying, while silver fell by INR 150 to INR 49,000 per kg on reduced off-take.
Traders said the gold remained steady on token buying by market participants to mark the beginning of new Hindu Samvat year 2070, while silver declined on lack of support.

They said buying activity was restricted and the volume of business limited. Gold buying in India, the world's biggest buyer of the metal, tapered off further after the festival week, even as domestic users started getting small import lots, weighing on premiums.
India, struggling with a high trade deficit and weak currency, had been trying to curb demand for gold, the second-biggest import item after oil. It has made gold expensive for consumers by setting a record 10 percent import duty and made supplies harder to come which kept gold more or less stablisied.

Diwali 2012- Generally, gold sales remain good throughout year but when festival season starts gold breaks record in terms of purchase demands in India. Its seems to be true for 2012 too. Although gold price was nearby INR 32,000/- per 10 gm. on Dhanteras, it did not affect the demand and the craze to own the yellow metal continued. Gold is considered as safe haven. Gold investment also helps in bad financial situation that is the reason people don’t hesitate in purchasing gold even at higher price.

Once again this year people showed added interest in purchasing Gold. That is the reason country’s top two exchanges BSE and NSE recorded a total turnover of over INR 2,200 crore in gold ETF on Dhanteras and simultaneously demand for gold coins and bars as also high. 

Although Gold was trading at a record price of INR 32,000 per 10gm. Investors were still investing in gold because they knew that investment in gold is secure as it gives return like 670% in 10 years which is difficult to achieve from other asset class and it was a life time high in 2012 which kept the faith of investors in the yellow metal alive

Diwali 2013-  Since 2013 was one of the worst performing years for gold, the demand for it declined too. In the domestic bullion market shows that demand had slowed drastically as compared to the last festive season. Gold prices were trading at levels of around

Rs30, 000/10gm and this factor to a great extent is seen as having a dampener effect on demand for gold jewellery. While compulsive gold shoppers would yearn to buy gold coins and bars, because of the tight supply conditions they may not be able to do so.

A firm global trend on speculation that the US Fed might maintain stimulus to boost economic growth also supported the sentiment, they said. On the other hand, jewellers were seen offering discounts on making charges in order to lure buyers. Then too, sentiments doing rounds in the gold market are on the weaker side for 2013  thus affecting big purchases among the small to-middle income group category

Diwali 2014-  Gold sales in India during the festivals of Diwali and Dhanteras celebrated this week rose by about a fifth, a senior official at the country's biggest gold trade group said

Premiums in India, the second biggest buyer of bullion, jumped to $17-$18 an ounce during Diwali. Diwali sales across the country were very good. It was about 20 per cent higher compared to 2013. The strong demand from India was supporting global gold prices.
India set a record high import duty on gold last year to curb its trade deficit, and made it necessary for importers to re-export a fifth of all their purchases. The move contained imports into the country, with the resulting supply shortage sending local premiums to about $160 an ounce over the global benchmark at one point. Some of the rules were eased earlier this year, leading to higher imports and a fall in local prices. This year prices were low, sentiment was good and there was a  stable government in the centre; all of these helped boost sales. In anticipation of strong demand during the festivals, India had imported $3.75 billion worth of gold in September - a 450 per cent jump from the same period last year.

India imported 151.6 tonnes of gold in November, up nearly 38 per cent from October, as traders bought aggressively expecting curbs on overseas purchases.

India last year levied a record import duty of 10 per cent on gold and introduced the 80:20 rules after surging trade and current account deficits sparked the worst currency turmoil since the 1998 balance of payment crisis.

But instead of putting in place more restrictions, the government surprisingly scrapped the so-called 80:20 rule in the previous month, mandating traders to export a fifth of all imported gold. Traders had few takers for the gold they bought in November.
Trading agencies were expecting curbs on imports and subsequently higher premium in December. So they imported more than their requirement but were then struggling to find buyers.

Diwali 2015- Rising for the second straight day, gold prices edged up by INR. 5 to reach INR. 26,235 per 10 grams on the eve of Diwali that fell on November 11.The bullion market witnessed increased buying by jewellers to meet festive and wedding season demand amid a mixed global trend.

Silver, however, met with resistance and dropped by INR. 535 to trade below INR. 35,000-mark at INR. 34,875 per kg. Traders said sustained buying by jewellers to meet festive season demand and a better trend overseas mainly kept gold prices higher.

Diwali 2016- Gold prices drifted lower by INR 100 to INR 30,650 per 10 grams in special 'Diwali Muhurat' trading at the bullion market on Sunday in the absence of worthwhile activity.

However, silver held steady at INR 43,000 per kg on scattered buying support from industrial units and coin makers. Traders attributed the fall in gold prices to absence of activity as jewellers kept buying restricted.

They, however, added that token buying activity on the auspicious occasion of 'Diwali' and the beginning of Hindu Samvat Year 2073 capped the fall.

Over all, unlike 2012, we did not get to see gold touching Rs. 32000 mark during Diwali since then. Gold seems to have been steady withing Rs. 25,5000- Rs.30,500 range around the festive season.

The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.

Previous blog:

"An Action Packed December: RSBL"

 http://riddisiddhibullionsltd.blogspot.in/2016/10/an-action-packed-december.html

Latest Gold & Silver news + Diwali wishes from Prithviraj Kothari!

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