How Bad is 15% For Gold and Silver?

India has taken another step in curbing precious metals imports.

Yesterday, the Indian Ministry of Finance raised import duties on gold and silver jewelry to 15%. Up significantly from the previous 10%.

This the latest step in a series of moves to make gold and silver imports more expensive. In January 2012, import duties on high-purity metals stood at just 2% for gold and 6% for silver. But in August 2013, both were raised to 10%.

Despite these duty increases on raw metal, the government had left jewelry tariffs unchanged at 10% during this period. But yesterday’s announcement cited fear that “Indian jewelery makers would not be able to compete with cheaper imports” as the driver for the increase on wrought metal.

This is obviously a set-back for gold and silver demand. India is one of the world’s most significant jewelry markets.

We’ll see if the rise in tariffs has a similar effect on jewelry demand as the raw gold and silver sector has seen recently. Gold imports into India during June, July and August hit some of the lowest levels in years. Despite lower bullion prices that should have attracted buyers into the market.

We’ll also see if tariffs stop here, or continue to trend higher as the government tries to plug its foreign-exchange gap.

Here’s to makers of fine things,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

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