Gloom to boom: Gold gets sparkle back for India’s festivals

Bloomberg

Until early this month, Indian jewellers expected the traditional surge in gold demand from the Hindu Festival of Diwali to be muted.
The industry was struggling to cope with a slump in sales caused by a government crackdown on the black market, and efforts to increase financial transparency. In August, jewelers were dealt a fresh blow by a decision to bring them under the Prevention of Money Laundering Act—a move they likened to being bracketed with those selling arms and ammunition.
Vigorous lobbying persuaded the government to reverse the decision, freeing customers from a requirement to provide their tax identity for every purchase above 50,000 rupees ($772). While the move will be reviewed, the backtrack lifted the mood and brought a positive change in sentiment before Diwali this week, according to Metals Focus Ltd.
“It’s a good thing for the market that there’s a government who is ready to listen,” said Chirag Sheth, a Mumbai-based analyst at the precious metals research firm. “The implementation of the rule was cumbersome for the trade.” Purchases in the two weeks that run up to the Dhanteras festival on October 17, two days before Diwali, usually total 20 to 30 metric tons and they may now be higher because of this latest shot in the arm, he said.
Dhanteras is the biggest and most auspicious day of the year to buy gold. While the three months through September were a “washout” in terms of demand, with the money laundering curbs damping purchases during the seasonal monsoon, sales for the full year are seen recovering 5 percent to about 700 tons from 2016, said Sheth. Last year was the worst for demand since 2009.
Shares of jewellers climbed in Mumbai on Monday.