UK wheat imports top 2m tonnes, and to stay strong
UK wheat imports jumped past the 2m tonne mark with three months of the season yet to go, according to customs data which also showed an uptick in rapeseed buy-ins – potentially also a taste of things to come.
The UK – the European Union’s third biggest wheat producer, and typically a net exporter – imported 251,000 tonnes of wheat in March, as consumers again turned to foreign supplies to fill the void left by the worst-quality harvest in a generation last year, when much of the crop failed to meet even feed specifications.
The imports, four times bigger than those brought in in March 2012, took the total for the first nine months of 2012-13 to 2.12m tonnes.
Canada and Germany, sources of hard milling wheat, were again the top origins for supplies, meeting demand from flour mills of whom only a tiny percentage of the UK crop met specifications, after the second wettest year on record devastated both yields and quality.
More than Saudi Arabia?
The monthly pace implies UK imports topping 2.8m tonnes over the season – more than the likes of Saudi Arabia or Bangladesh are expected to buy in.
Many traders believe that buyers have secured sufficient supplies to allow a slower pace of shipments towards the end of the season, although calculations are being reworked because of the slow development of this year’s UK crop, and the unusually-large proportion of spring-sown grain, which is harvested later.
After persistent rains late in 2012 prevented more than 20% of autumn-planted wheat from being seeded, cold and wet weather this year hampered spring sowings too.
Indeed, the UK looks set in 2013-14 as well to be a net importer of wheat, and perhaps also of rapeseed, given the damage caused by the weather, and the pests, notably slugs, that it has encouraged.
Oil World last week cut its estimate for the harvest in the UK, which consumes getting on for 2m tonnes of rapeseed a year, to 1.8-1.9m tonnes, and many other commentators have far lower estimates, including some below 1.5m tonnes.
"At long last, the true state of the UK rapeseed crop seems to be getting through to the wider world," traders at a major European commodities house said.
Last year’s rapeseed harvest was 2.56m tonnes, and while this has proven sufficient to keep the UK comfortably as a net exporter of the oilseed, imports in March topped 8,000 tonnes for the first time since August 2011.
Statistics: Posted by yoda — Tue May 14, 2013 12:11 pm
View full post on opinions.caduceusx.com
Gold-Confiscation Coming To India?
Written by Jeff Nielson
Thursday, 13 December 2012 12:42
As one of the loudest voices warning of the risks of “bullion confiscation” by our governments; it was no surprise to me to see the Corporate Media singing the virtues of bullion confiscation. What was a surprise is where this “initiative” purportedly originates: India.
Readers who follow the precious metals market are familiar with the dynamics here. Western Sheep choose to hold the bankers’ fraudulent paper currencies – despite our governments openly/explicitly driving the values of those currencies to zero with their “competitive devaluation.” It was this foolhardy mistake which is a major factor behind the greater-than-50% decline in the U.S. standard of living over the past 40 years.
Meanwhile the “peasants” in India (as well as many/most urban residents) do not engage in similar, suicidal behavior. They park their wealth in gold (and silver) bullion – immune to the print-and-dilute theft inherent in every fiat-currency system. It is one of the key reasons why Asian standards of living are rising, while those of the West plummet downward at the fastest rate in history.
In my own naivete, I had assumed that our predatory Western governments would target their own people for bullion confiscation, and look to steal the modest amount of savings of the shrewd minority in our societies who do hold precious metals. But apparently the bankers and Oligarchs have their sights set on a bigger prize: the largest private holdings of bullion in the world, in India.
Let’s be clear that this is obviously a Western proposal, as indicated by the English-speaking “front” organization used to deliver this propaganda. What is the substance of the proposal?
…Households and temples carry about 25,000 metric tons [of gold] and a successful plan to gather at least 10 percent of the gold reserves for lending to jewelers will ensure supplies for three years…
So here we see the modest goal of the Western Oligarchs: harvesting (i.e. confiscating) “at least 10 percent” of Indians’ gold, and to apparently repeat this harvest every three years – since the propagandists putting forth this trial-balloon claim that a 10% harvest would only deal with the supposed “problem” faced by India for three years.
We see further evidence that the entity spewing this banker propaganda is nothing but a Western mouthpiece, as any genuine “Indian” entity would understand that proposing to plunder the gold from India’s religious temples would be an absolute “non-starter” for its ¾ billion population.
Just as phony as the organization itself is the supposed “problem” which this bullion-confiscation scheme claims to address: what it calls India’s “current account deficit.” Here a quick definition is in order for those not conversant with this economic jargon.
A current account deficit (or surplus) represents the flow of “money” into/out of an economy. Just as nations have “trade deficits” (and surpluses), so too it is a necessary proposition of arithmetic that each year there will be some nations with net in-flows of capital, and others with net out-flows.
What is phony here is the lie behind the mythical “current account deficit” of India. As the world’s largest importer of gold bullion, each year India has a large out-flow of the bankers’ bogus paper currencies and a large in-flow of real money: gold. Obviously you cannot have a “current account deficit” (or surplus) in exchanging one form of money for another.
Let’s make no mistake here. The Western banksters themselves (and the Oligarchs they represent) not only consider gold to be “money”, but (as has been the case for 5,000 years) our best money. They recently were forced to elevate gold to the status of a “Tier I” monetary asset, in deference to its superior status to their own, debauched paper.
More importantly, it is these same banksters who require all international gold transfers between banks/governments to be reported and accounted for exactly as they do with their paper currencies. No one thinks of gold as “money” more than Western bankers. Thus the premise that India’s swapping of (bad) paper money for (good) gold money somehow is creating a “currency deficit” is not only wrong, but patently absurd.
There are several other points to note here. Notice that at no point in the Bloomberg article do the propagandists use the word “confiscate”. In the 2,000+ years in which the bankers have been stealing from us (since they originally went by the name “money-changers”), one lesson they have learned is that they are much more successful with their stealing if they scrupulously avoid using the word “steal.”
Of course the Corporate Media apologists will tell us that bullion confiscation is not “stealing”, as governments pay “fair compensation” for the gold (or silver) which they coercively obtain from their populace. Yes, just like the “fair compensation” paid by the U.S. government to its own citizens when it confiscated their gold in 1933 – and then immediately “revalued” it higher by 50%.
Put another way. First the U.S. government took its citizens gold. Then it retroactively reduced the actual value of the “fair compensation” by half. The only thing separating that from an open act of theft was that the U.S. government inserted an intermediate sham-transaction to make the theft a two-step process.
Am I trying to frighten readers away from gold and/or silver bullion by warning of the dangers of bullion-confiscation? Absolutely not. Indeed, regular readers know I deliver precisely the opposite message: gold and silver bullion (as a matter of simple arithmetic) is our best refuge from the Hyperinflation Hell looming directly ahead of us.
My message to people is to hold lots of gold/silver bullion (which cannot be debauched/stolen through the banksters’ money-printing scams). However, it’s crucial that people hold their precious metals personally; in a home safe or other secure location. Obviously if (when?) bullion confiscation takes place in our own societies (again), the first gold/silver to go will be every ounce contained in any/every bullion account, fund, or trust – as all this bullion can be snatched effortlessly with nothing more than a point-and-click.
Would our increasingly authoritarian governments ever send their Nazis to start busting down doors, looking for bullion “the hard way”? Three reasons mitigate against this.
1) Our governments’ Big Brother electronic surveillance still provides them with no way to identify the source/location of all wealth we have stored in bullion – another reason they don’t want the Little People holding gold and silver.
2) Similarly, since we could have disposed of our bullion in private, legal transactions; they have no way of proving that such privately-held bullion even exists (at least in holdings of moderate amounts).
3) Our governments (up until now) have shown the preference to Steal with Stealth. They have already looted more than ¾ of all our wealth over the decades; through banking and taxation systems which were structured to funnel all wealth out of the pockets of the bottom-99% and into the vaults of the Top-1% (over time).
While those reasons provide no absolute security for our bullion holdings; gold and silver still represent our safest form of financial security – given the alternatives. Apart from losing all our paper wealth relentlessly through the serial theft inherent in the banksters accelerating currency-dilution; (insolvent) Western governments have already begun “confiscating” (i.e. stealing) paper assets.
Some will argue for parking their wealth in real estate. However, not only do our permanent near-zero interest rates ensure that all real estate markets are permanently in some form of “bubble”, but land can also be seized. Unlike bullion, however, it can’t be hidden.
Statistics: Posted by yoda — Thu Dec 13, 2012 1:22 pm
View full post on opinions.caduceusx.com
UK to see big wheat imports as weak crop confirmed
Expectations of hefty UK wheat imports, potentially even from the US, firmed as farm officials confirmed the dismal domestic harvest, pegging yields at the lowest in 20 years, hurt by pressures from "high levels of disease".
The poor quantity, and quality, of the UK wheat crop, coupled with demand spurred by the opening of bioethanol capacity, could see imports "rise as far as 2.5m tonnes, or higher", Jonathan Lane, trading manager at merchant Gleadell said.
"Import amounts continue to rise as millers turn to imports to blend or replace UK supplies," he said, adding that imports of 2.5m tonnes would be "a figure not seen for many years", besides one which has constrained milling premiums despite the weak harvest.
It would also appear likely make the UK, unusually, a net wheat importer. UK wheat imports in 2011-12 came in at 867,000 tonnes, well below exports of 2.39m tonnes, customs data show.
‘Mills have been struggling’
The idea of significant imports was also flagged by UK grain traders at a major European commodities house, who highlighted talk over the trouble that mills were having generating flour from a poor quality domestic crop.
While lowering to 70 kilogrammes per hectolitre, from 76 kilogrammes per hectolitre, their hurdle rate for specific weight – a key quality metric – they will take for top grade wheat, mills "have been struggling" with the grain.
They have reportedly been "running flat out for 24 hours a day but still are unable to produce enough flour for their customers due to the very poor extraction rates", the traders said.
With German milling wheat "available delivered into the northern mills at about the same price as full spec Group 1s, and with consistent quality and specific weights well over 76 kilogrammes per hectolitre, It’s no surprise that millers are turning to this better material".
Imports from the US?
For Group 3 milling wheat, used in making biscuits, the dearth of supplies may even force millers to turn to US supplies, they said, echoing comments made by US broker Benson Quinn Commodities last month.
"The only alternative is US soft red winter wheat," the type traded in Chicago, which is "less than £20 tonne above our Group 3 prices delivered into the northern mills", the traders said.
"Again, with its better quality it may already be a viable option and we have to remember that once the decision is taken, it turns up in cargoes of 25,000 or 50,000 tonnes."
‘High levels of disease’
The comments came as Defra, the UK farm ministry, in its first estimates for the 2012 harvests warned that "yields for all [major] crops have fallen between 2011 and 2012, with wheat and oilseed rape showing the greatest drops", after the wettest summer in a century.
In wheat, "yields have been affected by the poor weather, which led to high levels of disease during spring and summer along with low sunlight levels during the grainfill period".
The wheat yield of 6.7 tonnes per hectare was the "lowest it has been during the last 20 years", with the harvest pegged at 13.3m tonnes, a 13% decline year on year.
The production figure is in line with a 13.25m-tonne estimate last week from the National Farmers Union, with Strategie Grains on Friday putting the crop at 13.4m tonnes, and the US Department of Agriculture on Thursday putting the crop at 14.0m tonnes.
Statistics: Posted by yoda — Mon Oct 15, 2012 6:11 am
View full post on opinions.caduceusx.com
Record corn harvest to cut Chinese imports by 60%
China’s much-watched corn imports will tumble by 60% thanks to improved harvest hopes, with Argentina and Brazil also set to help fill a void in supplies left by the drought-hit US output.
China, whose import prospects have been a big factor in influencing Chicago corn prices over the last two years, will import 2.0m tonnes of corn in 2012-13, down from the 5.0m previously expected, matching the previous season’s total, the US Department of Agriculture said.
The downgrade reflected – besides reduced hopes for exports from the US, which faces its lowest yield in 17 years – an increase of 5.0m tonnes to a record 200.0m tonnes in the forecast for the Chinese harvest, thanks to benign weather.
Feed vs meat
"According to reports from industry and government analysts, satellite imagery, and crop yield models, it appears that China’s corn yields in 2012-13 may exceed earlier expectations," the USDA said.
"The overall weather pattern has been favourable for corn growth this summer," with "above-normal rainfall in July" covering the important north east production region.
However, Steve Kahler, chief operating officer at exchange traded fund group Teucrium Trading, also flagged the importance of China’s meat consumption dynamics in determining its need for imports of corn, which is used primarily as a livestock feed.
"They may import more corn because they import less in the form of protein," Mr Kahler told Agrimoney.com.
Safra vs safrinha
The USDA lifted hopes for output in Mexico and South Africa, but particularly in the major South American producing countries of Argentina and Brazil, for which harvest estimates were raised by 3.0m tonnes apiece.
In Brazil, growers are expected, for the first time, to plant more second season, or safrinha, corn, sown as a follow-on crop after the soybean harvest, than first-crop corn to capitalise on high prices.
Ironically, the chance means that the safrinha, or so-called "little harvest", will exceed the safra, or big, one.
"In addition, Brazilian farmers in the Midwest and Northeast are adding more irrigation systems which reduce drought risks, increase yields, and increase crop area with double and triple cropping potential," the USDA said.
Dispute over acres
For Argentina, the second-ranked producer, the USDA boosted estimates for corn area to 3.8m hectares, on a harvested basis, noting that "excellent corn pricing has suggested potentially good returns".
The forecast contrasts with estimate earlier this week from the Buenos Aires Grains Exchange that Argentine corn area may fall 20% to 3.1m hectares in 2012-13.
"Reduced investment capacity among some growers following a bad season, the increase in some costs and a moisture deficit in a big part of the grains belt are variables that counterbalance incentives to plant," the exchange said.
Statistics: Posted by yoda — Fri Aug 10, 2012 10:11 am
View full post on opinions.caduceusx.com
Tyson does not rule out imports of Brazil corn
Lisa Baertlein, Reuters | Updated: August 6, 2012
Tyson Foods Inc, the biggest U.S. meat producer, said on Monday that it has not ruled out buying Brazilian corn due to a drought devastating the crop in the United States, but added that its current domestic supply cost less than imports.
"We run the math constantly and when it works that’s an avenue for us," said Donnie Smith, president and chief executive officer of Tyson Foods on a conference call with analysts.
"We’ve got a lot of truck corn bought from local farmers … the imported values out of Brazil wouldn’t compete with the costs that we’ve got," he said after the company announced its quarterly earnings.
Pork processor Smithfield Foods and poultry producer Pilgrim’s Pride, a unit of Brazil’s JBS, already have said they are importing corn from Brazil as the worst U.S. drought in half a century has sent domestic corn prices through the roof and made imports more attractive.
Tyson raises its own chickens while buying cattle and hogs to be processed into beef and pork.
The U.S. corn crop has been shrinking amid the expanding drought, with the U.S. Department of Agriculture in July cutting the size of the crop by 12 percent to 12.970 billion bushels. Analysts are expecting the department to cut its estimate further in a supply-demand report due on Friday.
Corn prices at the Chicago Board of Trade have soared more than 50 percent over the past two months, hitting a record high $8.28-3/4 a bushel on July 20, causing cattle ranchers and hog farmers to liquidate their herds as feed costs surge.
These producers have also been affected by the drought scorching pasture and lifting prices for hay.
Farmers in the South have begun harvesting their corn, with anecdotal accounts showing better-than-expected yields in states like Mississippi and Arkansas that were spared by the drought.
But about 75 percent of the U.S. corn and soybean crops are grown in the Midwest, where the drought spanning more than two-thirds of the contiguous United States is centered.
Statistics: Posted by yoda — Mon Aug 06, 2012 3:12 pm
View full post on opinions.caduceusx.com
Soy price to rise to curb buoyant Chinese imports
Soybean prices will "likely" set a fresh record to contain Chinese soybean imports, which data showed soaring in June, Macquarie said on Monday, even as futures tumbled.
The double whammy of drought damage to US Midwest crops, following disappointing South American harvest at the start of the year, has "set up an explosive situation" for soybean prices, the bank said.
Soybean prices, which touched records above $17.70 a bushel last week, "will likely have to rise further" to constrain demand.
This includes orders from China, the world’s largest buyer, which customs data on Monday showed importing 5.6m tonnes of the oilseed last month, the highest figure for eight months, and a rise of 31% on the figure for June last year.
‘Curtail Chinese imports’
"Any production loss that we see in the US will require prices to rise to even higher levels now in order to curtail Chinese import demand," Macquarie said.
"Prices will have to trade in the high teens [dollars per bushel] for the rest of the year for this to occur."
The bank added: "If yields fall to below 40 bushels per acre, we will have to ration a significant volume of Chinese imports through the 2012-13 season."
In fact, many analysts have already cut their forecasts for the US soybean yield below this level, with Goldman Sachs on Monday downgrading its estimate to 39.5 bushels per acre.
The US Department of Agriculture estimate is at 40.5 bushels per acre.
However, soybeans, and other agriculture commodities, suffered losses on Monday, fuelled by fears for eurozone debt, and forecasts for much-needed rain in the Midwest.
Smaller domestic harvest
Any reduction in Chinese imports would come against a backdrop of domestic production hopes weakened by a switch by growers from the oilseed to corn, which offers better returns.
Indeed, Barclays Capital said that a third successive year of smaller soybean sowings in 2012, "as farmers increase domestic corn production, bodes well for higher 2012-13 soybean imports".
Chinese corn imports were elevated too in June, reaching a five-month high of 528,600 tonnes, quadruple those of May.
However, imports of wheat, which has been favoured as a feed grain thanks to high corn prices, fell to a five-month low of 216,700 tonnes, down 61% month on month, although as BarCap noted, "the decline came from record high wheat imports in May".
China’s cotton imports, net of 5,900 in exports, also fell to a five-month low, of 470,100 tonnes, after the country wound down its programme of rebuilding state stockpiles.
Cocoa and coffee buy-ins also fell.
However, sugar imports more than trebled, year on year, to 380,100 tonnes, the highest of 2012 so far.
Statistics: Posted by yoda — Mon Jul 23, 2012 12:52 pm
View full post on opinions.caduceusx.com
Gold Glitters In India: Will Curbing Imports Save The Economy?
By Sreeja VN: Subscribe to Sreeja’s RSS feed
June 23, 2012 9:05 AM EDT
"An inch of time is an inch of gold, but you can’t buy that inch of time with an inch of gold." Does this Chinese proverb ring true in the case of Indians who invest in gold for a ‘good time’ tomorrow? Or is the craze for the yellow metal ruining the country’s economy?
Time and again, the government, economists and experts have ridiculed Indians’ obsession with gold and pointed out the need to curtail imports of the yellow metal to improve trade deficit.
Indians are irresistibly attracted to gold – either to be bought as ornaments or investments. Their fascination with gold jewelry has roots in the culture, tradition and also the economic realities at the rural and grassroot levels of the society. As an investment, gold has been an easier bet to hedge against inflation and other risks. Indians have been buying and trading in gold since time immemorial, and continue to buy even now, at a time when it is more expensive than ever.
The government and experts believe that high gold imports are fatal to the economy. If India were to reduce gold imports, it could solve the country’s economic problems, erase the current account deficit, appreciate the rupee and boost growth. Experts say the country’s balance of payment (BOP) is negative because of the gold imports.
"Quantum of import of gold … is a clear indication (that) large section of community…want (to) investment in dead asset only with expectation that value
would appreciate," said Finance Minister Pranab Mukherjee at a function in Mumbai last week. He said that "there is a need to spread financial literacy to encourage people to invest in market instruments" and dissuade them from investing in gold.
The government believes the common man can easily save the country’s faltering economy by sacrificing his passion for gold.
However, those Indians who have spent their fortunes on gold and a section of analysts beg to differ. They say although gold imports affect the country’s BOP position in the short-term, India’s gold reserves will benefit the people and the country in the longer run. They feel there is no basis in the saying that gold is an idle asset. "From investors’ point of view, gold is not an idle asset. When it is appreciating, it is not a dead asset for the holder," says Jayesh Nathwani of FXWire.
To understand both the standpoints, one needs to understand what gold means for Indians and the cultural and economic reasoning associated with it.
Quick Facts About India’s Gold and Economy
•India is the world’s largest importer of gold. India accounts for nearly one-third of the total world demand for gold. India’s gold imports were higher than those of twelve of its states’ GSDP in the year 2010-11.
•Gold’s share in total import bill of the country has gone up from 8.1 percent in 2001-02 to 9.6 percent in 2010-11. The average rate of growth of gold imports in the last three years was 26.8 percent. At this rate, the gold import bill will be approximately $100 billion by 2015-16.
•According to a World Gold Council report, India has savings rate of approximately 30 percent, with 10 percent of this being in gold. It says that gold reserves in India, both with private and government, were around 20,000 tons at the end of 2011 and it is worth roughly Rs 54 lakh crore, which is 60 percent of the nominal GDP of India in 2011-12.
•Gold import value for the year 2010-11 was higher than the budget-estimated expenditure on Urban Development, Housing, and Family Welfare for the year 2010-11.
•According to the Gold Council report, gold jewelry accounted for about 75 percent of the total Indian gold demand in 2009, the remainder being investment (23 percent) and decorative and industrial use (2 percent).
•Requirement for gold in India depends upon the seasonal demands in the country, such as weddings and festivals, and not on the highs and lows in the international prices. So people tend to buy gold at whatever the price may be in these seasons.
India’s Golden Tradition
Gold is a part and parcel of India’s culture and tradition. As money, jewelry, status symbol and investment, gold has played a crucial role in the lives of Indians for centuries. A family’s wealth was determined on the quantity of gold and land they Gold is considered "Lakshmi" (the Hindu goddess of wealth) and a symbol of prosperity.
Traditionally and, as a religious practice, an Indian woman wears ornaments throughout her life. Gold is her metal of choice for jewelry. Usually, from childhood till the end of her life, the Indian woman will adorn herself with various gold ornaments, depending on her wealth and status. The trend in recent times is more toward platinum and white gold among the urban elite, but for the middle- and lower-class families, jewelry means only gold.
Nothing can replace the status and importance of gold in the Indian society. In south India, the first food a newborn consumes will contain gold. According to tradition, the elder family member makes a paste of a local herb and a miniscule quantity of gold and feeds the baby its first morsel. This is believed to bring wealth and prosperity to the baby in his/her life.
Gold is also part of the religious rituals at homes and temples. In several states, the yellow metal is worshipped as a symbol of Lakshmi and wealth.
No wedding is complete without gold, and gold ornaments are exchanged during wedding ceremonies, no matter which religion the bride and groom may belong to. Mangalsutra – a neck chain with a mandatory gold pendent – is presented by the groom to the bride during the Hindu wedding ceremony. Apart from this, Indian brides are bedecked in gold at their weddings. Though dowry is banned in India, it still exists in practice and gold is the most common form of dowry given to daughters at the time of their wedding.
The "Akshaya Trithiya" is an auspicious day in the Hindu calendar to buy gold. Devotees celebrate this day (usually in April) by buying gold. In recent years, this festival has become highly commercialized as the jewelers have started promoting the sales with discounts. Gold ornaments worth millions of rupees are purchased across the country on this day.
The Economic Importance
The importance of gold in the Indian society lies in its money, investment and risk aversion quotient. Historically, gold was the unit of currency. In India, there is no difference between the rural and urban or the rich and poor when it comes to investing in gold. Irrespective of their caste and creed, Indians consider gold as the most tangible form of investment.
Gold remains the easiest asset and investment for the rural poor because of its availability, liquidity and ease of purchase and sale. About 60 percent of India’s gold demand is from rural areas. It is their best tool for risk aversion and hedge inflation and is their insurance against future losses. It is also linked to the rural economy and the agriculture and trade sector. Farmers buy gold after the harvest as an investment. They often sell or pawn gold during farming season to meet expenses. This insulates them from the claws of rural creditors who charge exorbitant interest rates on money borrowings.
Rural and urban middle- and lower-class income groups invest in gold for the future when it will be used to raise money for weddings in the family, renovation of houses and meet any unforeseen expenses, either by selling or pawning it.
India’s demand for gold is seasonal and dependent on domestic factors, not on international factors and prices. Gold purchases go up during post-harvest, wedding and festival season and come down in the monsoon.
Economists, concerned about India’s current account deficit, argue that Indians are importing gold at a time when gold prices are too high in the international market. Since India depends on imports to meet more than 80 percent of its gold requirement and gold as a commodity on its own, it doesn’t add much to the economic productivity. "We have to pay in dollars to buy gold. A huge part of our forex resources which could have been used to import productive goods are wasted on it," says Mangalore-based economist Jayadeva Prasad Moleyar.
"Most gold is in the form of ornaments with the private people in households or are piled in bank lockers for most of the time. Gold doesn’t have economic value; it only has emotional value. And considering the heavy pressure its puts on imports, it is an investment better avoided Moleyar added.
Experts also warn that it is unscientific to buy gold at current rates as the prices are high but show symptoms of declining. Moreover, they say that money squandered in gold should be used for productive purposes within the country, considering the extent of poverty and lack of social infrastructure in India.
On the other hand, some analysts and the common people in the country don’t agree to this and argue that the very theory claiming gold as an idle investment is flawed. "There was a time when gold was used mainly for jewelry purpose. But now all over the world, the trend has changed and gold is an investment option. All over the globe, asset managers and funds are holding gold as an investment tool. Even in India, people depend on gold to hedge inflation," says Nathwani.
Unlike international investors and lenders who invest in markets and trade, most Indians investing in gold aim at long-term benefits so as to hedge the short-term price volatility in the prices of gold. They also opine that the government and financial experts fighting for reduction in gold imports ignore the fact that in the present situation gold is the best, risk-free investment tool that can cope with spiraling inflation.
If the government is looking at reducing investment in gold, then it should provide its citizens with an alternative. As of now, there there seems to be none. For the rural Indians, who are the highest consumers of gold, bank deposits and the realty sector are the only easily accessible investment options. But bank deposits are unattractive as the inflation rate is higher than the interest rates while realty prices have skyrocketed even in the rural areas, making investment difficult for those in the middle and lower income groups.
Many Indians blame bad governance for the trade deficit in the country and believe that instead of attempting to change the centuries-old obsession with gold, the government should try to reduce inflation and economic indicators to save the economy. "It is the government’s duty to save the economy, then why is it asking the people to do so? Why can’t they take steps to improve exports to solve the trade deficit rather than curtailing imports?" asks Jayashree Chakkere, a lecturer in a college in Bangalore.
Considering that India’s cultural affinity toward gold, in all its forms, has roots in its ancient history, it is unreasonable, not to mention highly impossible, to convince Indians to refrain from the very tradition of buying gold.
"We need to have gold jewelry for both the bride and the groom at the time of a wedding. How can I marry off my daughter without giving her any gold? I have to buy gold for her even if it means borrowing money. Though it is going to be difficult for me now, I am sure it will help her if she ever faces bad times," says K Narayan, a farmer from the south Indian state of Kerala.
Difficulties in Reducing the Gold Imports
Even while arguing about cautioning people against buying gold, economists are aware of the difficulty in doing so. In the past, the government had tried to regulate gold prices by controlling its supply, sealing the purchase limits and increasing tariffs. Till the mid-sixties, the government had tight control over gold transactions as it barred the manufacturing of gold ornaments with more than 14 carats of purity. Even in the last budget, the government hiked taxes on gold.
However, experts feel that hiking duties on the yellow metal will only lead to an increase in the prices of gold in the domestic market. Due to social factors, people cannot avoid buying gold and a rise in the prices will only benefit those involved in smuggling gold, black market trade and ‘hawala’ transactions, as was the case in Vietnam some years ago when its government imposed a ban on gold imports.
"India has to live with gold imports. Gold imports cannot be banned as it is a citizen’s fundamental right to buy gold. Further, any such measure will increase anti-social activities like smuggling. The government can only request citizens not to buy. But no one will listen to the government. Though gold import hurts the economy, it is not the only thing that is blocking the growth or depreciating the rupee. The government should look into policy issues and improve exports. Even global issues like the euro zone problems affect the economy. Reducing gold imports to correct the BOP problem is a temporary solution," says Moleyar.
"The government is resorting to a short-term approach. It has increased the tax from 1 percent to 4 percent and has been successful in reducing the imports roughly by 30-35 percent. This has affected business badly. The notion that gold is non-productive is wrong. When millions of people use it as a security and investment, it cannot be non-productive. Moreover, the very government that has asked its people not to buy gold, purchased around 200 tons of gold recently," says S Venkatesh Babu, a wholesale bullion importer and president of the Jewelers Association of Karnataka.
Babu says the need of the hour is for the government to improve its policies and governance rather than passing the buck on to the common man. "The government should bring in the right reforms and economic policy to solve the economic crisis rather than controlling the bullion imports," he adds.
The government’s attempts at dissuading its people from investing in the yellow metal may not work out, as apparently Indians truly believe that an inch of gold can buy an inch of ‘good time’ in the future.
Statistics: Posted by DIGGER DAN — Mon Jun 25, 2012 12:26 am
View full post on opinions.caduceusx.com
New Delhi: India, the world’s biggest consumer of bullion, increased import duties on gold and silver, potentially cooling demand from jewellery buyers and investors.
The government began taxing gold bars and coins at an additional 2 per cent from yesterday, while silver attracts a 6 per cent levy, the finance ministry said on its website. Overseas purchases of gold were taxed at Rs300 (Dh21.74) per 10 grams and of silver at Rs1,500 a kilogram before yesterday.
Gold imports were already poised to drop 48 per cent in the first quarter as a decline in the rupee boosted prices and high borrowing costs cooled demand, Prithviraj Kothari, president of the Bombay Bullion Association, said on January 3. There won’t be much impact on imports, he said yesterday. The higher taxes may help Prime Minister Manmohan Singh cut the fiscal deficit as slowing growth threatens to erode revenue.
"The government increased the duty probably to collect more revenue," said Kothari by phone. "Prices will rise in the domestic market."
Gold for delivery in February on the Multi Commodity Exchange of India jumped as much as 1.1 per cent to Rs27,778 per 10 grams yesterday. Futures gained 32 per cent last year after India’s rupee slumped 16 per cent against the dollar.
Gold importers pay about Rs540 per 10 grams as taxes from yesterday, Kothari said. India’s gold imports dropped to 875-880 tonnes last year from 958 tonnes in 2010, while purchases may have fallen below 125 tonnes in three months ended on December 31 from 281 tonnes a year ago, according to the association.
Eye on increased revenue
Rs300: levy on overseas gold purchases until yesterday
Statistics: Posted by yoda — Wed Jan 18, 2012 11:31 am
View full post on opinions.caduceusx.com