A day after Prime Minister Narendra Modi announced that Rs 500 and Rs 1,000 currency notes would cease to be legal tender from the midnight of November 8 – a move aimed at cracking down on the flow of black money – those in possession of unaccounted wealth were seen rushing to jewellers to buy gold.

While these people were willing to pay huge premiums, jewellers were ready to accept old currency notes. The transactions took place on past-dated bills; even VAT was paid. As a result of this rush, there was a sudden spurt in demand for gold. According to market estimates, as much as $1 billion worth of gold, or around 30 tonnes, has been imported since November 9.
 
GFMS Thomson Reuters estimates that India’s gross official import of gold was worth nearly $1.5 billion as of November 14. Of this, as much as $900 million worth of the metal was imported after the demonetisation of high-value legal tenders. While this estimate does not exclude gold imported for exports, such gold would have been a small part of total imports. It should be noted that the government had last month said that for according the status of a nominated agency, the export of gold jewellery from export-processing zones (EPZs) and export-oriented units (EoUs)  would not be taken into account.

 
The country’s import of the yellow metal had stood at about $3.5 billion in October, according to GFMS Thomson Reuters estimates.
 
The demand for gold had dropped in India during pitrupaksha, a 15-day period considered inauspicious by the Hindus for purchase or sale assets. But it significantly increased after that period, especially in the days leading up to Diwali.
 
According to Shekhar Bhandari, senior executive vice-president and business head, global transaction banking and precious metals, Kotak Mahindra Bank, said: “Gold demand has been good since Diwali, and the trend continues. In the past few days, especially amid a marriage season, customers have been seen using debit cards to make payments for jewellery.” This trend is being seen widely among organised or big jewellers.
 
Meanwhile at Zaveri Bazar, Indian Bullion and Jewellers Association (IBJA) on Sunday sent messages to jewellers that there was the possibility of the income-tax department asking them to deposit old currency with it by November 15, to stop the malpractice of selling gold at a premium for banned currencies. The last date for depositing the banned currency notes with banks or exchanges has otherwise been fixed as December 30.
 
So far, however, there has been no official communication on this from any department, according Surendra Mehta, Secretary, IBJA. “No jewellers, to our best knowledge, are accepting old notes now,” Mehta said.
 
Against an average monthly import of 30 tonnes since February, October alone saw an import of an estimated $3.5 billion, or 56 tonnes, of gold.
 
No one is ready to predict the import trend in the coming weeks, as there are fears that the government might impose a ban on gold imports. However, there has been no official word on this so far.

Sources:.business-standard.com