Gold demand in India is expected to remain below its 10-year average value for the third consecutive year in 2018. Higher taxes and new transparency rules for metal purchases are among the main reasons for these forecasts, according to a World Gold Council (WGC) analysis.India is the second largest consumer of gold and weaker metal demand there may trigger downward pressure on gold, some experts predict.
Gold rose 8% since mid-December, despite the fall in metal imports to India, which, incidentally, helped reduce the country's trade deficit.
Consumption of gold this year in India is expected to be between 700 and 880 tonnes, compared with 727 tonnes in the past year. Over the past 10 years, the consumption of gold in India amounted to 840 tonnes on average.
Demand for the yellow metal is likely to be low as a result of the additional metal tax in 2017 and additional measures to track gold purchases.
In July of last year, the gold tax was raised from 1.2 to 3%, with gold buyers already having to disclose their tax code when buying gold at high value.
The government's actions have seriously affected small jewelery stores, which account for nearly two-thirds of total gold sales in India.
According to well-known sources, there are still some changes that could further affect the consumption of gold in India.
Gold has an extremely important place in Indian culture, and it is a major way of saving hundreds of millions of people in the third largest Asian economy.
Gold demand rose 9 percent in 2017 to 726.9 tonnes after demand for jewelery business rose 12 percent on an annual basis.
A serious problem for the business is the illegal import of gold. According to country statistics, illegal gold of 120 tonnes was imported in the past year. The same amount is expected to enter smuggling this year.
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