Not to be outdone by China expanding the gold market within its own country, some Indian banks are seeking to trade gold in their home country. They recently submitted a proposal to the Reserve Bank of India (RBI), the central bank of the country, requesting this permission. If their request is approved, it will allow these banks to cash in.
Only 20 Indian banks are currently allowed to import and sell gold and none of them may stockpile or repurchase gold they have previously sold. These banks and other authorized agencies represent 80 percent of the gold imported into India. The banks that prepared the proposal would like to do things like invest in gold ETFs, which should help increase the gold securities trade within the country.
China has already reported that its banks will be permitted to import and export larger quantities of gold. The country may also permit second-tier banks to partner with four of the major state banks in order to hedge bullion positions within overseas markets. The central bank in China may even grant foreign suppliers the opportunity to provide the Shanghai Gold Exchange with gold bullion.
In 2009, Indian import of gold was a mere 35 tons, a sharp decline from the 2008 import figure of 400 tons. However, gold demand jumped 84 percent during the fourth quarter of 2009. In the first quarter of 2010, the World Gold Council tagged the country with the distinction of having the strongest performing gold market. During this period, consumer demand skyrocketed by 698 percent. India, the world’s number one consumer of gold, now represents more than 20 percent of the global gold demand, while China’s imports during 2009 represented 11 percent of the world’s gold demand.
The import slump in India has been attributed to carry-over gold stocks held by Indian banks and the rising price of gold. Thus far in 2010, gold imports continued to fall from 34 tons to 13.8 tons during the period from January to June, despite a brief increase to 34.2 tons in April due to the Aksya Trithiya festival. RBI purchased 200 tons of gold from the International Monetary Fund in October 2009, making it the tenth largest central bank holder of gold in the world. According to one banking executive, “If banks are allowed to trade in gold, the move will only strengthen the bull case in gold.”
Source: Seth, Shivom. Mineweb.com. China pushes for gold; India follows suit.
Tags: gold investment news, Gold News