Kenapa Harga Emas Naik : The Indian Factor

Physical Gold Demand Expected To Pick Up As Indian Festival Approaches, Jewelers Strike Ends

Physical demand for gold is expected to pick up again now that Indian jewelry shops have ended a strike, although it remains to be seen how strong this demand will be and whether the protests will resume next month, analysts said.

A majority of India’s jewelers closed their shops for roughly three weeks to protest a doubling of the import tax on gold from 2% to 4% and introduction of an excise tax of 1% on unbranded gold jewelry. Jewelers reopened late last week when Finance Minister Pranab Mukherjee reportedly offered assurances he would consider a rollback of the excise duty.

“The majority of India’s jewelry industry comprises of small shops and of the two tax increases, the excise tax is viewed as more onerous for smaller jewelry stores to comply with, according Indian merchants,” said Jim Steel, analyst with HSBC.

India, along with China, is one of the world’s two largest consumers of gold. The end of the strike comes at a key time, with the approach of India’s gift-giving Akshaya Tritiya festival on April 24.

“Though too early to tell, the re-opening of the Indian jewelers for business last Saturday should bring out the pent-up demand,” said Austin Kiddle, director of Sharps Pixley. “The Indian consumers will gear up for the Akshaya Tritiya festival…as well as the wedding season. Physical demand, especially from India and China, is the key supporting factor for investment demand for gold.”

So far, physical buying from India has been reported following the end of the jewelers strike over the weekend, said Alex Thorndike, a metals and forex dealer with MKS Finance. “With the Akshaya Tritiya festival coming up on 24 April in India, it is likely that merchants and jewelers in the world’s largest gold consumer will look to replenish stocks,” he said.

Still, UBS precious-metals strategist Edel Tully described the demand as modest so far. She said gold, which fell roughly 10% from the late-February high to last week’s low, needs physical buying in order to turn a corner and build momentum.

“The end of the jewelers strike in India provides a good foundation, especially with the Akshaya Tritiya festival on April 24,” she said. “But prices need to be appropriate. Last week, Indian demand only became impressive when gold traded below $1,620. Appetite from India so far this week has been quite modest.”

Further, Barclays Capital precious-metals analyst Suki Cooper pointed out that jewelers have said they will be reopened through May 11, pending a favorable announcement on the removal of the excise tax on unbranded jewelry. Nevertheless, the reopening should support prices in the near term at a time when Indian demand for gold tends to be prominent, Cooper said.

HSBC’s Steel cited a Financial Times report saying that closures of the jewelry shops were met with fresh demand for saving certificates redeemable for bullion as an alternative to physical gold buying.

“Since the protest began, interest in alternative forms of bullion indicates the level of pent-up demand for gold and the resumption of the Indian jewelry market as shops reopen is gold bullish, we believe,” Steel said.

By Allen Sykora of Kitco News; asykora@kitco.com