India is the world's second-biggest gold consumer and lower demand in the country could rein in global prices that have risen 8 per cent since the middle of December, although a drop in gold imports would help the country reduce its trade deficit.
Gold consumption in 2018 will likely be between 700 and 800 tonnes versus 727 tonnes last year, Somasundaram PR, the managing director of WGC's Indian operations, said on Tuesday. The demand for gold in the country averaged 840 tonnes over the last 10 years.
Gold demand will lag because of the higher goods and services tax (GST) on bullion purchases imposed in 2017 and measures to track gold purchases, he said.
In July, the GST on gold was raised to 3 per cent from 1.2 per cent. The government has also made it mandatory for customers to disclose their tax code, or Permanent Account Number (PAN), for high-value gold purchases.
"More changes are coming in like hall marking, responsible gold sourcing, all this will continue to disrupt the industry... It will take two years for India to reach normal demand level," he said.
Gold demand in the country rose 9 per cent in 2017 from 2016 to 726.9 tonnes as jewellery demand rose 12 per cent from a year ago, the WGC said in a report published on Tuesday.
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