Gold Prices Down After Customs Duty Cut | NDTV Profit - video Dailymotion

NDTV Profit

Watch Gold Prices Down After Customs Duty Cut | NDTV Profit - NDTV Profit on Dailymotion

Transcript

00:00We are now joined by G. Chandrasekhar, who is a commodities market specialist.

00:04Mr. Chandrasekhar, thank you and good evening.

00:07Mr. Chandrasekhar, you know, everybody is watching today.

00:11The only question on their mind is, should they buy on gold

00:15after the slash and custom duty or would you suggest that they wait?

00:19Because obviously, you know, the past inventories are still there.

00:25My sense is they should wait,

00:27because I see a further downside risk to gold and silver prices in the short term.

00:33OK, and therefore it would be worth waiting.

00:36But let me let me also mention that there is obviously some justification

00:42for the government of India to reduce the custom duty on gold,

00:46which was as high as 15 percent in the last two quarters.

00:50International prices and domestic prices had actually risen

00:54by about between 20 and 25 percent.

00:57But look at the relief.

00:58The relief is 60 percent from 15 percent to 6 percent is a 60 percent relief.

01:03Therefore, honestly, and I want to be blunt,

01:06I don't know what considerations lay with the finance minister

01:10and the finance ministry to give such a big relief

01:15in gold custom duty, because this is also going to cost.

01:19There'll be some revenue will be foregone.

01:22There'll be some revenue loss.

01:24How much is the revenue loss?

01:26We still don't know.

01:27That has not been quantified.

01:29Well, the jewelry trade is very happy, and therefore we should be happy

01:33that at least one section of the of the trade is happy about it.

01:38But I think the government has to come up with some rationale

01:42why duty was cut by as high as 60 percent from 15

01:48to 2 to 6 percent.

01:51This is number one.

01:52Number two, a lot of people are asking me will what impact

01:56will it have with demand for jewelry go up?

01:58With due respect, in my view, there'll be a marginally increase

02:02in demand for jewelry, physical, physical jewelry,

02:06primarily because of the upcoming festival season.

02:09And then, of course, the marriage season, et cetera.

02:12But medium term, even these current prices

02:16are in some way leading to demand destruction.

02:20And people are not going to enjoy buying at even the current lower levels.

02:26And therefore, there will be an impact on the trade

02:29and on consumption of gold within our country.

02:34Oversee, you can you will see it in 2025.

02:37Put it that way. Yeah.

02:38Right. And as we are flashing those graphics on the screen,

02:41your view on Titan, Kalyan and Senko,

02:44you know, especially with respect to inventories that are held by them.

02:49Of course, Titan usually holds the most.

02:52Right. Obviously, those companies that had bought gold

02:58at higher prices, say, two thousand two hundred, two thousand three hundred,

03:03two thousand four hundred dollars an ounce

03:06are all will all be ruling now, primarily because the prices

03:10have sharply corrected both in dollar terms

03:13and in rupee terms in particular.

03:17And therefore, they would in some way, there is an inventory loss,

03:21loss of value in that inventory, how they would recover, whether a quicker

03:28quicker liquidation of these stocks at lower prices would help

03:32is a call they would take.

03:34But the answer to this question is how much inventory,

03:40high price inventory each company is holding.

03:44We will know how much high price inventory each company is holding.

03:48But more often than not, most companies actually average out the prices

03:53and therefore not much of inventory

03:56may be purchased at, say, two thousand three hundred or two thousand

04:00four hundred dollars.

04:01That's my view.

04:02And therefore, the loss of inventory

04:05value could may not be very hard.

04:08Put it that way.

04:09Right. Mr. Chandrasekhar, I also wanted your view on sovereign gold

04:12bonds now, you know, in the past they have provided for steady returns.

04:16But obviously, with this cut in customs duty,

04:20people who are looking to redeem now, how do you see the impact on that?

04:26Obviously, after five years, people are free to redeem,

04:30although the tenure is eight years.

04:32And therefore, when prices are down, people will have to take a call

04:36whether should I should I redeem it now or wait for one, two or three years

04:41away if prices would rise.

04:44I think it's a very, very tricky situation for them,

04:46because in the international market, let us be very clear.

04:50Gold at two thousand three hundred or two thousand four hundred dollars

04:54announced actually carries up to two hundred dollars

04:58announced as war risk premium.

05:01Assume a situation may be hypothetical tomorrow.

05:05There is a ceasefire both in Russia, Ukraine

05:09conflict and the Hamas conflict.

05:11Gold will collapse.

05:13It'll come closer to two thousand dollars announced.

05:16And that's a war risk premium that the market carries.

05:20And then the financial investors who are heavily invested

05:24in gold as a speculative investment, they'll also be exiting the market.

05:30Therefore, there could be a big correction.

05:31But it's a hypothetical situation.

05:34You can't rule out the possibility, though.

05:36Therefore, for gold sovereign bond holders,

05:40I would think it is safer to redeem

05:44redeem soon as soon as possible.

05:48But also remember, my call is in the last quarter of this year.

05:52Gold prices will have the potential to rise from the current levels.

05:56Right. And final question, of course, you know, we just heard

06:01comments about how the government actually did this,

06:04keeping gold smuggling in mind.

06:05What's your view on that?

06:07And the second part I wanted to ask you is the organized sector

06:11versus the unorganized sector, you know, where a lot of people in India

06:14still buy gold in cash.

06:17Right. So it's like this on smuggling.

06:19My take is very clear and I want to be very blunt.

06:23There is there is one section of people in the trade

06:26that exaggerate the impact of smuggling.

06:30Smuggling did happen in this country in the 60s and the 70s,

06:33even in the 80s.

06:35And, you know, we've also seen Hindi movies

06:39both coming from Dubai with smuggled gold, etc.

06:42Those days are over.

06:44The government has enough surveillance mechanism,

06:48enough of a coast guard

06:51and security related facilities.

06:54Therefore, it's not possible for for anybody

06:58to smuggle gold in very large quantities.

07:01It is possible passengers coming may carry one

07:04one coin of gold or two coins of gold and kind of escape.

07:08But that I don't see that as a big case of smuggling.

07:12Therefore, the excuse or the reason

07:16given that it will it will reduce smuggling to my mind

07:20seems very, very superficial.

07:22I don't think it will hold water, honestly.

07:25Number two, what is the second question?

07:26Sorry, what did you say?

07:29Because, you know, a lot of people are still buying gold in cash

07:34from the unorganized sector.

07:35So what's your view on that?

07:37Obviously, it will happen because they would they would want to avoid

07:41the the the duty component of this.

07:45And there are sellers who are willing to compromise.

07:48And there are buyers who are willing to pay cash and compromise.

07:51But all said and done, let us be honest.

07:54Our country, there is an informal sector almost everywhere.

07:58We cannot wish away the informal sector.

08:00And the informal sector also contributes very substantially

08:05to India's economic activity.

08:07I'm not saying I think we should not dismiss the the informal sector

08:12because it is it is a good big contributor to economic growth.

08:16We need regulation, which is very important.

08:18But but given the vastness of this country

08:22and the levels of income and the rates of taxation

08:26and the motivation to to remain in the informal sector

08:31rather than in the formal sector, which is subject to a huge amount

08:34of regulation and discipline, I think we need to look at all that.

08:39Therefore, there will be a set of people who will who will want to buy gold

08:43informally paying cash, and there will be a set of traders

08:47will be happy to happy to sell to those buyers.

08:51And therefore, it's both the responsibility of the buyer and the seller

08:56to to to have some kind of self-imposed discipline.

09:02But but this is how it has been going on.

09:05But over the last 10 years, I find the the informal

09:09a sale of gold is very substantially reduced.

09:12There is a certain formalization of of this gold business.

09:16I've actually written a policy paper

09:19for the SEBI and for the government of India.

09:21How what are the reforms that are required in the in the in the bullion sector

09:27and the gold jewellery sector and how India can actually become a price setter?

09:33We are today a price taker in the global market as far as gold is concerned.

09:37Although we are the largest importer, we should be setting international prices.

09:42And there are there are several steps that the government needs to take

09:46that the government needs to take for us to become a price setter.

09:50Once we reach that situation, I think the there'll be further

09:55a further decline in the informal business in gold and silver.

10:00All right, Mr. Chandrasekhar, thank you very much for joining us on the broadcast

10:03and explaining to us, of course, his advice to all those of you

10:07who are looking to buy now is to wait for some more time.

10:11Thank you for joining us. Thank you.

10:16Thank you for joining us. Thank you for joining us.

Gold Prices Down After Customs Duty Cut | NDTV Profit

Category

Transcript

Recommended