Indian Elephant remains in the room

As we mentioned last week all eyes were on the Indian budget Thursday night to see if the new Government would abolish the restrictive 10% tax on gold and accompanying 80/20 import export rule.  There were no changes which may see two things happen.  Firstly the already rampant smuggling will escalate and secondly there was a lull in buying in the lead up as people expected the tax to be reduced or abolished.  Neither happened so there are some expecting a short term rush in buying to satisfy those needs, coinciding with the strong global demand and price growth of late.  

The Indian Government said recently that gold imports fell by 34% to 670.4 t year on year to the end of March 2014.  If you consider that does not account for the reported smuggling supplementing demand, it is still an extraordinary amount of gold from the country who until last year held the crown for biggest gold consumer in the world.