'Have patience till the next rally in gold'

Jasprit Bumrah, the premier Indian fast bowler, is renowned in the cricket world (across all formats) for his slower ones, bouncers and his most lethal yorkers. He is known to lure the batsman with his slower one followed by a bouncer. He then delivers the lethal yorker that invariably castles the batsman. Recently, the union commerce minister used similar tactics to floor the gold trade during the Gold Summit at Delhi.

The minister lured the audience with a slower one when he told the gathering that let bygones be bygones, a few black sheep should not tarnish the image (words to that effect), alluding to the frauds that shook the trade and the government just a couple of years ago, committed by the then so-called big names in the industry. He then referred to the issues of high import duty, scarce bank finance, high gold price and poor export and domestic demand in the current year. Softened up, he then rocked them back by reminding the trade about how they had gone on the failed 40-odd day strike against excise duty and how afterwards the GST implementation in this industry had been seamless. He then proceeded to deliver the `killer yorker’. He put the onus squarely on the trade to identify and weed out the black sheep in the trade. He told the trade that they should be aware who in the trade indulged in wrong doings and that the trade should name and shame them. Or else refuse to have anything to do with them. Isolate them, by say, putting up a board saying that we would not take smuggled gold, etc. Once the process of cleaning up begins, then and only then would all the grievances of the trade like lowering of import duty, etc would be taken up with the finance ministry with some force of conviction. All the above was sugar-coated as the minister urged the members present at summit to consider his `humble request’. But, the bottom line -- the onus is on the trade to get its act together first.

This is the age of instant gratification. Probably, T-20 cricket has brought it sharply into focus for us in India. What we saw in Maharashtra in the last few weeks was the sordid saga of seeking instant power by any means. Only the end mattered, the rest was secondary or not worth any consideration. All the participants came out with a black mark against them, save none. Gold too is embroiled in this age of instant gratification. Even after a 20% rise in the gold price since the beginning of the year, it seeks to scale the $1,600 per ounce mark instantly, nay, even $1,700-1,800 per ounce levels without any delay. The fact that gold struggled barely above the $1,450 per ounce levels made everyone very nervous and anxious. Has gold missed the boat? True, that was the question uttered with some fear.

However, most of the parameters that saw the gold surge are still very much in place. There is still uncertainty about the trade war, the not so healthy state of the global economy, disturbances in Hong Kong, Trump’s impeachment proceedings, possibility of further reduction in interest rates by the Fed and the EU, Brexit, the volatile oil prices and the US dollar. Only the US dollar’s strength could arrest gold’s next rally. In the meantime, it is time to have patience till the next rally in gold. Elsewhere, gold closed on November 29 at $1,460.15 per ounce and Rs. 38,019 per 10 gms (London pm fixed and IBJA gold price for domestic prices).

Finally, at long last, the Consumer Affairs minister announced on Friday, November 29, 2019 that the government had notified the WTO that mandatory hallmarking would be notified on January 15, 2020 and that it would be implemented a year later from January 15, 2021. Any infringement thereafter would attract a fine of Rs.1 lakh and a one year imprisonment. The jewellers, etc. had one year to clear their stock. Only last week, the BIS chief had clarified that hallmarking would become mandatory on all jewellery ornaments, etc. that are sold by the trade. Any gold jewellery, etc. held by individuals and sold to jewellers, retailers, scrap dealers, etc. would not be under the aegis of hallmarking. The onus of hallmarking rests squarely on the trade.

Probably, the Domestic Council for Gems & Jewellery, formed earlier in the year, will have to take up its maiden cause on behalf of the trade and take up the gauntlet thrown at them by two different ministries – namely, Commerce and Consumer Affairs!

The author is an independent analyst of precious metals and diamonds, who has worked with GFMS and WGC.