The Indian gold industry is considered to be one of the largest industries in the world. The industry has witnessed a lot of ebb and flows last year, right from excise duty rates to introduction of PAN card for purchase of gold and the demonetisation drive. All these factors, along with introduction of goods and services tax (GST) and the election of Donald Trump as US president will together frame the outlook for gold in 2017.
Experts say the government can clarify that if women inherit gold up to 500 gm, it can be considered as ‘stree dhan’ (women’s property). And if such inheritance can be supported by documents — bills or will of gift, deed etc — then such gold, when deposited under the GMS, no questions on the source will be asked. There are still a few measures on which the government is working. The first is compulsory hallmarking of jewellery. The government now has the powers to penalise the holders of jewellery that is not hallmarked. However, early this month the government prescribed that only three standards will be followed and 14-, 18- and 22-carat jewellery could be hallmarked.
This year India will implement its own gold standards. This means gold refined by Indian refiners following prescribed standards will be accepted as valid tenderable gold in accordance with Indian standards on commodity exchanges and international markets. At present the global benchmark for refined gold is the gold standard fixed by the London Bullion Market Association (LBMA)
The government’s fight against black money and corruption began with the income declaration scheme. The denomination of R500 and R1000 notes is a sequel to same and we support this relentless fight against corruption. Demonetisation is definitely going to leave its effect in the initial months of the coming year. We may not achieve a good sales figure in comparison to previous years, but the aspiration that people have for the yellow metal, makes jewellery buying an important part of the season. Besides, it is a good time to invest in gold as the rates are low and it is expected to be the same for the next quarter.
All these factors are having an adverse impact across the sector. However, high end jewellery brands are largely a part of an organised market and transactions are done on the basis of an invoice. Earlier, a large portion of the population bought gold jewellery for investment and also as a status symbol.
Gold purchases, of late, has been more need-based. In 2017, consumers’ preference would be more for lightweight jewellery with emphasis on innovative jewellery designs. Customers today prefer buying jewellery that they can actually wear rather than keeping it in the lockers. Everyone is looking to buy jewellery that can be worn, which largely includes earrings, chain and pendants, rings, nose rings, etc.
Gold and silver were trading flat with marginal gains in early trade on the first day of Calendar 2017 due to lack of global cues amid subdued buying by jewellers, investors and industries.
The yellow metal was trading 0.20 per cent, or Rs 56, higher at Rs 27,501 per 10 gm at around 10.30 am (IST), while the white metal was trading 0.26 per cent, or Rs 103, higher at Rs 39,152 per 1 kg on the Multi Commodity Exchange (MCX).
However, silver declined by Rs 100 to Rs 39,300 per kg owing to reduced offtake by industrial units.
Traders said absence of cues from global markets which are closed, mainly kept gold prices unaltered here.
In the national capital, gold of 99.9 and 99.5 per cent purity ruled flat at Rs 28,300 and Rs 28,150 per 10 grams, respectively. It had lost Rs 200 on the last trading session of 2016 on Saturday.
SMC Investment and Advisors in a research note said, “Gold can move in the Rs 27,300-27,500 per 10 gm range while silver can move in the Rs 38,700-39,400 range in the near term.”
Gold prices eased on Friday as gains from a weak dollar was offset by profit taking at the end of a year in which bullion gained about more than 8 per cent, snapping three years of declines.
Director of RSBL, Prithviraj Kothari is of the view that since Gold prices tumbled to 10-month lows on December 15 after the Fed hiked interest rates, this signaled could be an expected rise in rates more quickly than previously anticipated in 2017.
Q. 1. How has gold demand trend made a difference with monsoon rainfalls in India and how has it affected the forecast upon the impact of physical gold and silver?
Ans : Finance Minister Arun Jaitley surprised the market by keeping the import duty intact and imposing an excise duty on gold jewellery sales from March 1, leading to a one-and-a-half-month strike by jewellers resulting into a fall in gold demand in India. However, falling interest rates and a better return from bullion so far in 2016 could lure more consumers. So, price fall would trigger more fresh demand coming in resulting into physical offtake to go up. The year 2016 is expected to end in a high note in terms of physical demand of gold.
Past 6 months, gold import figure for half yearly was almost 7.5 billion dollar, which means approximately 180 tonnes. As compared to last year, there is a 50-60% drop down in the market for reasons such as pan card issue, excise duty issue, 10% custom duty which has hugely affected the demand.
After 2 years of El Nino effect, this year monsoon has fared really well with 5% overall rise as compared to last year. This would surely lead to an increase in Rural demand of Yellow metal.
During sowing season, farmers normally sell gold for purchasing of seeds and fertilizers. With normal monsoon, however, they get better kharif output and expectation of higher rabi output. So, normal monsoon rainfalls always give higher chance for consumer demand of gold to improve. Gold demand has been lackluster so far this year with the government’s strict norms on bringing jewellers under excise duty and also mandatory PAN (permanent account number) requirement for cash jewellery purchase beyond a limit. All these acted as a negative factor for gold purchase. But, with normal monsoon rainfalls giving more disposable income at the hands of farmers, who hold nearly 70 per cent of India’s gold holding, would certainly improve demand going forward.
Q. 2. Options trading on MCX is on cards. How is it beneficial for the industry?
Ans : I have been saying this since 3-4 years during the Pre-budget comments and finally it seems that the Options product would be finally introduced. It will be a boon for a bullion trader and jeweller. By using this instrument they can hedge their future position and in a way provide the necessary risk cover. An investor will also be highly benefitted from this instrument. He/she will get a chance to invest in a larger quantity of metal with a lower investment and reap benefits till the expiry date.
Q. 3. What is your forecast for gold and silver prices for Diwali & New Year and how is it beneficial to Indian consumers?
Ans : Gold and silver prices are likely to remain subdued this calendar year on strengthening dollar against major global currencies and a host of other weak fundamentals acting against it. With some intermittent volatility, gold may touch $1200 by the current calendar year end translating thereby Rs 28500 per 10 grams by December. Following the European Central Bank’s official announcement of a withdrawal of bond purchase programme prior to the end of quantitative easing, the dollar is likely to remain strong against major global currencies. With Brexit fear mounting against the United Kingdom with the country’ possible departure from the European Union by 2019, pound sterling has already hit 31-year low. So, strengthening US dollar would create selling pressure in gold resulting into its price to remain weak by Diwali and the New Year.
Indian jewellery sales have fallen since the start of the year, hit by higher gold prices and delayed purchase decisions by consumers who had hoped for a cut in India’s 10 per cent import duty on gold in the national budget. Gold demand in India has remained lower this year with consumers opting for alternative investment avenues including paper gold. So, physical demand of gold was lower so far this year. As data from the Commerce Ministry reveals, India’s gold import bill fell to a decade low at $7.2 billion in the first half of calendar 2016. Physical demand has been lackluster so far this year as consumers wait for price fall. The level of Rs 28500 per 10 grams, therefore, would provide a good opportunity for buyers to book their share of gold. But, the fall in global markets may not reflect in India fully as rupee would proportionately depreciate along with dollar’s appreciation. But, the price decline ahead of this festive season will definitely change the mood of consumers to help increase buying sentiment.
Q. 4. What would be the possible impact of presidential election in the US on gold?
Ans : Elections always tend to influence financial markets in either a positive or negative way, mainly depending on the general perception as to whether the incumbent in the White House is going to be a change for good, or not as the case may be. There are some interesting historical precedents when it comes to stock market reactions immediately after a presidential election, which in turn, has a definite influence on other financial instruments and markets, such as the price of gold. Every US election staged since 1888 has resulted in average stock market decline of about 0.5% in the first three days of the first new presidential week. The longer term outlook is that stocks have historically fared better over the full four-year term, when a Democratic administration has taken up residence in the White House. The US presidential Election date is November 8th, 2016.
Q. 5. How will interest rate hike by the US Fed impact gold?
Ans : Interest rate hike as expected in December will be negative for gold as investors would seek refuge in alternative investment avenues including real estate, stock market, bond and others for high returns. So, the interest rate hike would trigger a pull back of investment from gold resulting into a sharp fall in gold prices. Since, US labour department has presented a strong manufacturing and job data, speculations are rife for the December rate hike. Markets, however, would also consider other important factors including physical demand, a pull back in monetary easing by the European Central Bank etc. before going for a knee jerk reaction.
Q. 6. What are new product innovations at RSBL?
Ans : RSBL is looking to launch new products this season to lure customers in coins, biscuits with customized products. Currently, RSBL has only two varieties in Platinum i.e. 5gm and 10gm. This Diwali, we have added more denominations in Platinum i.e. 1gm, 2gm, 20gm & 50gm. Furthermore, designer Gold jewellery of 2gm to 10gm have also been added as product extensions and both platinum and gold jewellery facilitate greater investment opportunities and buyback guarantee.
Q. 7. What are your suggestions to the viewers with respect to investing in Gold and Silver, following you?
Ans : I would recommend everyone to invest in Gold & silver with whatever little savings you have as it's the most safest investment that can be inherited and endured too. Government has recently started with new policies such as gold sovereign bonds which is one of the best investment policy. You can loans at 1% in International market at 2.5% interest rate. With the wedding season around the corner, more than 50-60 lakh marriages are taken place throughout a year and a wedding ceremony would by default mean buying gold. Therefore, this would give a rise in the gold imports as well.
New monsoon fund will be allocated and the demand will increase for gold and silver. Whenever the gold prices decline, people should invest more often in Gold, Silver and Platinum as it will give better returns. Last couple of years have not been favourable for Silver and Platinum but as per the current industry standards, Investment in Silver and Platinum are definitely worth earning returns in the years to come.
Profile Note:
Mr. Prithviraj Saremal Kothari is a renowned name in the Gold Silver and Platinum Bullion Industry. He has been instrumental in the development of the bullion market in India.
A commerce graduate from the Mumbai University, Mr. Kothari has been in the family business of gold trading since over 30 years and counting. As one of the promoters, he has almost single handedly steered RiddiSiddhi Bullions Limited (RSBL) to the top 10 unlisted public companies in India in terms of sales turnover as per BS1000.
He has given some crucial advice to the Indian Government in helping them make the bullion markets more organized. He has been the pioneer in introducing 'Instant International price based INR denominated bullion trading in India'.
He is also on the advisory committee of the Multi-Commodity Exchange of India (MCX) and has advised MCX and NCDEX for devising successful gold and silver contracts. In the past, He had served as the President of the Bombay Bullion Association (BBA). As a president, he had played a crucial role in promoting BBA in the international markets.
He has played a vital role in the introduction of gold ETFs in India. Under his vision, RSBL has successfully launched India's first and only electronic over the counter bullion trading system, RSBL SPOT.
He has been felicitated with the prestigious Jain Ratna award twice, once by Honourable President of India, Smt. Pratibhadevi Patil on 13th March, 2012 and second time by Honourable Chief Minister of Maharashtra Mr. Prithviraj Chauhan on 23rd April, 2013 for contributing remarkably towards the well being and upbringing of the Jain fraternity.
In what has come as a relief to Prithviraj Kothari, one of the largest bullion traders in the country, the Gujarat High Court on Friday set aside a non-bailable arrest warrant against him issued by a special court for Prevention of Money Laundering Act (PMLA) in connection with the Rs. 5,395-crore Hawala scam.
The scam, which is being investigated by the team of Enforcement Directorate (ED) is seen as the biggest hawala racket unearthed so far and blow the lid off many high profile cases, including establishing the money trail in the 2G telecom scam.
The special court for PMLA had issued the arrest warrant against Prithviraj Kothari, who is also the managing director of RiddhiSiddhi Bullions Limited (RSBL) about 10 days ago.
Justice Abhilasha Kumari quashed the warrant issued by the special court for Prevention of Money Laundering Act cases.
According to sources in the ED Kothari had aided main accused in the scam diamond trader Afroze Fatta send over Rs. 1000 crore to his companies in Dubai via hawala channels. This money apparently travelled to tax havens and countries like US, Singapore, HongKong and Switzerland.
The money was sent outside India between December 2013 and January 2014 allegedly on forged documents to make bogus import bills that show import of diamonds.
The ED had in March 2014 busted a multi-crore Hawala scam during their search operations in offices of some diamond traders, including Afroze Fatta and Madanlal Jain, in Surat.
ED sources had stated that Fatta and Jain were mere front-end and the real kingpins could be Prithviraj Kothari and his associate Rajesh Jain, who is based out of Dubai.
Over last several years, RSBL has become synonymous to coins made up of gold, silver and platinum.
Bullion dealer and retailer RiddiSiddhi Bullions Ltd (RSBL) has been conferred with 'best bullion dealer in coin (gold/silver)' award for 2015 by India Bullion and Jewellers Association Ltd (IBJA) -- apex jewellers’ body. The award was received by Prithviraj Kothari, Chairman, RSBL.
Over the last several years, RSBL has become synonymous to coins made up of gold, silver and platinum available in every denomination. RSBL has been instrumental in development of bullion market in India and making it more organsed. Kothari has been the pioneer in introducing 'instant international transparent benchmark price-based rupee denominated bullion trading in India'.
As president of erstwhile Bombay Bullion Association (now IBJA), Kothari played a vital role in the launch of gold Exchange Trade Funds (ETFs) in India. RSBL has successfully launched India’s first and only electronic over-the-counter bullion trading system – RSBL Spot.
RSBL is a leading company in India which deals in bullion, specialising in bars and coins of various precious metals like gold, silver and platinum. RSBL is in the top 10 unlisted public companies in India in terms of sales turnover. RSBL has developed easy, reliable and user friendly systems and products.
Mr. Prithviraj Kothari, Chairman of RiddiSiddhi Bullions Lt.(RSBL) is seen receiving prestigious "Best Bullions Dealer in Gold & Silver Coins" Award by Indian Bullion Jewllery Association (IBJA).
Mr. Prithviraj Kothari, Chairman of RiddiSiddhi Bullions Lt.(RSBL) is seen receiving prestigious "Best Bullions Dealer in Gold & Silver Coins" Award by Indian Bullion Jewllery Association (IBJA).
