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    Drought unlikely to hit gold demand in India: World Gold Council

    Synopsis

    According to WGC the strike by the jewellers and the ongoing drought in several states may not affect the overall demand for gold in India.

    ET Bureau
    KOCHI: The strike by the jewellers and the ongoing drought in several states may not affect the overall demand for gold in India, which could more or less stay at last year’s level, according to World Gold Council India. WGC will come out with the first quarter review of Indian gold market next month.

    “We expect a natural growth. Last year, the volumes grew by 2%. The monsoon failures are not reflected in the overall gold demand in the country as the economy is now managing such distress well,” Somasundaram PR, managing director of WGC India, told ET.

    The gold prices may remain stable in the long run as the rates seem to have already factored in the uncertainties.

    “The central banks are still buying and the gold prices have increased even after the US raised interest rates,” he said. In 2015, total gold consumption in India touched 849 tonnes while the import improved marginally to 898 tonnes.

    He argued against imposing restrictions on gold as it would discourage people from viewing it as an investment. In south India, which accounts for 40% of the total gold consumption in the country, gold is the second investment option after term deposits. “Now the total duty and taxes on gold comes to around 12.5% including customs duty, VAT and excise duty, which is on the higher side,” he said.

    Somasundaram felt that increasing the availability of Indian gold coins may encourage temples to deposit gold in banks in the long run as it could prompt the devotees to offer gold coins instead of jewellery in temples.

    “This can prevent melting loss as in the case of jewellery and questions on purity,” he said, adding that even temples can be encouraged to come out with their brand of coins. He also suggested promoting gold tourism through museums displaying gold artefacts from temples.

    Somasundaram hailed the recent step by China to introduce gold exchange rate based on its currency. “China and India account for 50% of the gold consumption in the world. So, it is a step in the right direction providing an alternative to the dollar-based rates of the Comex. It will have implications in India too, he said.


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