In a surprise move, the Indian government has removed restrictions on gold imports and although generally positive for the gold market, it won’t significantly change the overall bearish tone, according to some analysts.
On Friday, the Indian government removed its current 80:20 import rule, which said that 20% of all imported gold had to be mandatory exported before any new shipments could be brought in. Analysts have pointed out that the news is a surprise because recently there was speculation that the government would tighten import rules.
Although the 80:20 rule was curtained, the government did not mention whether it will reduce the 10% duty on all gold imports.
Analysts, though, are not expecting gold demand in India to drastically change because of the eased restriction as smuggling has increased significantly since 2013.
“On the margins it’s positive for gold but I don’t see it as a game changer,” said Bart Melek, head of commodity strategy at TD securities.
Melek added that “informal networks” filled the void created by the import controls. However, he admitted that now that those restrictions have been lifted, premiums should end up dropping, which could increase demand throughout the country.
Julian Jessop, chief global economist at Capital Economics, agreed that the government rules on gold imports weren’t very effective and although the news is bullish for the market, it will not drive prices significantly higher in the near-term