Indian Gold Book:Indian Gold Book - Gold Bars Worldwide

GOLD SUPPLY AND DEMAND
Movements in net supply and demand since 1990 fall into 2 broad periods.
1990 - 1997: High growth over 8 years. From 178 tonnes to 645 tonnes
1998 - 2001: Largely static market over 4 years. Ranging between 650 - 690 tonnes.
To understand unexpected movements in imports, it is necessary to take into account the large quantity of old jewellery,
coins and bars recycled. It is substantial and tends to increase when the gold price spikes. A small increase in
recycling at this time can reduce imports substantially.
In 2001, when 672 tonnes were imported for the domestic market, an indicative estimate is that gross demand was
about 1,053 tonnes.
The gross statistic puts high tonnages of industrial fabrication (4%), coin fabrication (3%) and net bar hoarding (2%)
into perspective. Jewellery accounts for around 90% of gross demand.
NET SUPPLY
1990 – 1997 (8 years)
Imports for the domestic market grew rapidly from 176 tonnes to 642 tonnes in 1997.
Official imports were permitted for the first time in decades when the Non-Resident Indian (NRI) scheme was launched in
March 1992. It enabled NRI’s (and organised NRI syndicates) to import 5 kg of gold every 6 months.
Over the period, official imports accounted for 63% of total imports. NRI’s accounted for 56%. The Special Import Licence
(SIL) scheme that included gold from April 1994 accounted for 7%. Unofficial imports were responsible for 37%.
1998 – 2001 (4 years)
Imports for the domestic market remained largely static, ranging between 640 – 690 tonnes.
Since 1998, authorised banks and Public Sector Undertakings have dominated official imports. Their first imports under the
OGL scheme occurred in November 1997. Banks and PSU’s now account for more than 99%.
Over the period, official imports accounted for approximately 87% of total imports.
Gold mine output and gold as a by-product
Primary gold mining yields around 2 tonnes annually. Total gold output increased to 9 tonnes in 2001, due to Birla Copper
starting to process imported copper concentrates in 2000.
Imports for jewellery exporters
Duty-free gold imports for re-export as jewellery (mainly studded with diamonds and other stones) have grown
substantially from 11 tonnes in 1990 to 54 tonnes in 2001 - 2002. These imports are not included in the analysis of the
domestic market.
GROSS SUPPLY
Annual gross supply is much influenced by the amount of old jewellery, coins and bars recycled.
Although the high level of recycling is not under-estimated by Indian analysts, it has not been widely publicised outside India.
There are many forms of recycling as recorded in the chapter on “Gold Jewellery”.
The Indian gold market is so complex, and so variable by State, by urban and rural area, and by retailer, that any national
estimate of recycling can only be indicative. To try to obtain precise estimates is just not possible.
What is important is a broad understanding of the approximate size, nature and annual change in recycling, and how it
impacts on gross and net demand.
Recycling of old jewellery, coins and bars
Although there is great variation by retailer, by rural/urban area and by State, anecdotal evidence suggests (conservatively)
that 40% of new jewellery sold nationally in 2001 was fabricated from old jewellery exchanged for new jewellery or bought
back for cash, or from old coins and bars. This suggests that for every 1,200 kg of gold imported, an additional 800 kg of
old gold was recycled.
Large retailers in several States report an increase in recycling, mainly for exchange purposes, over the past 3 - 4 years.
Compared to 40% in 2001, the national average may have been around 35% in 1998.
In the first 6 months of 2002, due to the spurt in the gold price, recycling nationally is reported to be have exceeded 50%.
AN INTRODUCTION TO THE INDIAN GOLD MARKET 167