As equities plunge, will gold glitter this year?
The gold market in India is eagerly awaiting policy initiatives by the government. The finance minister has promised various positive initiatives for gold including a comprehensive policy and creation of a gold exchange. As the policy measures unfold, the World Gold Council (WGC) is optimistic that demand for 2018 will stabilise at 700-800 tonne, up from 727 tonne last year.
However, lower demand in India, the world’s second-biggest gold consumer, could rein in global prices in 2018. As per a recent WGC report, gold demand will lag because of a higher goods and services tax on bullion purchases imposed in 2017 – which was raised to 3% from 1.2% -- and measures to track gold purchases.
The government has also made it mandatory for customers to disclose Permanent Account Number for high-value gold purchases. Surely, the government moves have disrupted the business of the small jewellers that account for nearly two-third of India’s total sales. It is interesting to note that 2017 saw an increase in demand primarily driven by a number of events, including lower gold prices coinciding with Dhanteras and improved sentiment. Will the demand in India remain below its 10-year average for a third year in 2018? Or will government measures push up demand? The market is optimistic.
(Source: DNA Money)