Summary

Transcript

Let us dig into some of the things that are affecting that rally because India certainly has been in the news this year and India’s silver imports to double on demand for solar and investment. Well hello there, my friends, Chris Marcus here with you for Arcadia Economics, and in today’s show, we’re going to take a look at some of the recent figures and data affecting India’s gold and silver imports and demand. Yes, I might note I am wearing a slightly gold-colored shirt along with a silver necklace, so with that set, let us dig in.

We’ll take a quick look at the gold and silver prices before we begin because here, as of Tuesday night, we see 25.53 in the gold market and 30.37 in the silver market. We are now keeping in mind looking at the December contract. It’s interesting that, you know, we had the big rally earlier this year. Obviously, we’ve had some pullbacks where a lot of people were concerned, and certainly, if you’ve been watching how gold and silver trade for the last decade or so, when prices come down, it can be a little bit of a daunting feeling. Although there we are after everything that’s happened, still about $20 off of the all-time high for gold, and the rally is still intact this year.

So with that said, let us dig into some of the things that are affecting that rally because India certainly has been in the news this year. On Friday, note from Reuters here, India’s silver imports are to double on demand for solar and investment, which certainly is true and noteworthy. Although, as I’ll point out in a minute when we take a look at the data, 2022 was that big year. In fact, let’s take a look at the data right now. Why wait?

Here we go. Here’s 2022, where you had 9,600 tons—basically, I think it was 304 million ounces—dropped off quite a bit last year, 3,500 tons for the whole year. Here we are about midway through; this includes up to June of 2024, so certainly on pace for a big year. In terms of how that breaks down, here we can see monthly import totals with the later blue line being 2023, and there in the darker blue line, 2024. You can see it started out with a really strong start to the year. Again, in February, it had that big 2,200-ton import figure, but it has come back quite a bit, and we see the last couple of months here, numbers a bit on the smaller side.

So it’s a bit of lumpy demand, but certainly, as we go back and take a look here, depending on what happens in the second half of the year, it is possible you could challenge that 9,600 figure, which was a record. Go back a little longer; here is the long term going back to 1999, and there is that 2022 figure, which you can see as a record. In terms of whether we could actually hit that this year, again, while I point out that it’s not a steady figure each month, there was something that happened a couple of weeks ago that certainly will have an impact on that.

Here it is: India slashes import tax on gold and silver. It had been 15 percent and as we will touch on before we wrap up today certainly ahead of the festive season could make quite a difference so certainly possible that we could reach a similar figure but let us continue on here because again they mentioned silver imports to double this year and nearly double this year versus 2023 2022 if the record year if we match that or exceed that I mean any of these numbers that we’re seeing here I think are significant but just putting that into context and people are also buying for investment purposes now that the duty cut has made silver more affordable and due to depleted inventories in 2023.

Industrial silver buyers have been stockpiling the metal this year to guard bullion dealer at a silver importing bank so that is on the silver side and we’ll have a few more things to touch on there and actually here is one more before we move over to gold for a little bit you can see the Indian price in silver rupees which has set a record this year here we have the chart going back to 1980 many currencies have experienced record gold prices in their relative currencies as well so obviously with it rallying in US dollars certainly driving that and anyway there you can see the silver price in Indian Rupees.

And here we had something that also came out on Friday where we heard Peruvian officials mentioning that exports to India set to hit a record high set to jump 36% from a year ago and some interesting comments here from Javier Manuel Polonique Velarde the Peruvian ambassador to India and he mentions India became the second biggest buyer of proves gold and it should invest in new gold mining projects India fulfills most of its gold demand through imports and China Canada Mexico and the US are investing in the Peruvian sector.

Yet India has not done so despite being a large importer of gold mentions we currently have six major gold projects in the investment stage with total buying investment of seven billion dollars so either case again you can see that the imports from Peru up 36% versus a year ago and here we can take a look at the annual India gold imports and let’s click that okay so we’re zoomed all the way out and again this is as of June data so about half the way through here and on pace for another decent year and is interesting if we flip over to got a lot of things pulled up here today but yes if we flip over to this one change in G20 central bank gold reserves it’s from the Atlantic council and they’re getting their data from world gold council so I believe this is likely accurate and interesting to see that India leading the even head of China over the last three years.

And that is on a percentage basis so that’s another thing that could be affected with that cut in the import taxes so certainly the possibility that you could get above that six or seven hundred ton mark and certainly we will keep an eye on that for you as we go through the year here is from the world gold council that it’s nice they actually do have Kavita who writes about India and also someone who provides a weekly update on what’s going on in China and you hear reduction of gold import duty brought domestic gold price is lower with year-to-date gains now.

10 percent lower import duty has also reportedly boosted consumer demand ahead of the festive season turned strong demand pushed the domestic gold price to a premium relative to the landed price following five months of discounts and as we have mentioned on the show earlier this year Reserve Bank of India has been adding to their gold holdings they repatriated gold from London and we saw that gold ETFs saw substantial inflows in July which is another thing that we have talked about here so of course it will be interesting to see what happens with India in the context of the things leading up to the these seems to feel that we will there there will be some sort of announcement at the October meeting not necessarily the entire plan but i’d asked him a couple months ago if he thought they would formally announce something.

i think back then he said no although uh seems like he is expecting that we may see some sort of official announcement there so if you have this happening with the lower tax at a festive season on the other hand uh india traditionally a price sensitive buyer so with gold and silver on the higher side of their recent ranges more so in gold than silver but that could be a counteracting factor there so but certainly going to be an interesting second half of the year now another thing that has been going on with india this one is on the silver side you may have seen that large portion of indian silver imports were starting to come from the united arab emirates based on the comprehensive economic partnership agreement that they had signed so you had a 15 tax on silver coming from other regions yet basically there was a it lowered the rate to nine percent for the ua with a three percent value added tax and that goes down a percent per year so it was at 12 then it went to 11 and i had been wondering based on the reduction in the tax rates where that left the ua agreement and checked in and this was from metals focus who according to what they’re saying here seems like the cepa with ua has not been affected so basically the other rates came down and the ua is going to stay at the same point uh same uh rate as they mentioned here with the import duty.

Outside the cpa at 15 before the announcement and under the cpa cpa nine percent and eight percent this year even with the value added of three percent it’s cheaper to get the metal through ua e here moreover the incentives to source silver from ua also led to a surge in india’s overall silver imports in 2024 and that we saw reflected in that february number i’d point out before we’re they call 2250 tons this is interesting at one point during march there was an estimated 1500 tons of silver stocks lying in warehouses in india this was later slowly drawn down although not entirely consumer demand failed to match the inflow of the metal into the country so did have some overhang in inventory after that record number and again if you go back here to our chart pack you can see here is where they getting that inventory so lower figures here if that has worn off then uh again we could see higher numbers going throughout the end of the year and as such the current six the current duty of six percent on all billion takes away the benefit that the ua had enjoyed for the last two years and of course what is one of the driving factors behind that air india to increase solar panel production to reduce china dependence this came out a week a couple weeks ago india’s adani group is planning a 150 increase in the output of solar panels by 2026.

And while india’s clean power capacity crossed a landmark 200 gigawatts earlier this year the pace of additions needs to accelerate to achieve the country’s green energy target 500 gigawatts by decade end and fortunately we have a handy chart here now they were talking about clean energy this is solar specifically yet you see from 14 gigawatts back in 2021 up to 48 in 2023 of reported numbers some forecasts in the 2024 given that we are not finished with 2024 yet but you see that basically they’re set to double according to these projections which come from rystad energies renewables and power solution so and again as our adani group mentioned here going higher by 2030 and of course least as the projections call for even higher after that so from here from a couple months ago we saw india ads record 10 gigawatts of solar capacity in in the first quarter of 2024 marking almost a 400 percent year over year increase.

And the last one that i wanted to show here this was coming from the twitter kilograms of gold traded on the ibx monthly and you see as that has been getting ramped up the figures picking up there quite a bit uh interesting to note here while this is not the total gold imported by india by any measure certainly a good proxy indicator of high imports that are happening and a similar trend was observed in silver and here you can see the silver volume traded on the iibx so either case some things happening in india again that’s on top of their central bank gold imports uh central bank gold purchases and also the repatriation of the gold and the fact that they are part of the bricks and hopefully this helps to put some things in context give a few things to keep an eye on of course if you hit the subscribe button and that notification bell we can keep you posted on this as we go forward in the months ahead.

And lastly just in wrapping up did want to thank first majestic silver who brought us this video today first majestic had their earnings out about uh three weeks ago now it was and uh certainly it’s been a tough couple of quarters following everything that happened with jared canyon last year fortunately they did have some discovery results and expiration results at santa elena and again a key thing is going to be bringing down costs in the second half of the year which is in some senses underway with the new water source at latin cantata and also getting san dimas production back up online after a tough quarter there some of the things to keep an eye out for but either case going to wrap up for today appreciate you being here and watching and we will look forward to seeing you again tomorrow