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Sparkling trade in gold worth $411m

WESTERN Australian gold exports to India topped the State’s export list last year, making it the most valuable export to the sub-continent.

A total of 25 tonnes, or $A411.9 million worth, of gold was exported directly to India, according to the Australian Bureau of Statistics.

With WA exports to India totalling $567.6 million, the precious metal made up the lion’s share of this market.

Gold is one of the world’s most valued commodities – currently holding $US370 to $375 an ounce – and WA produces a large percentage of the world’s gold.

But more importantly, it seems Indians can’t get enough of the precious yellow metal.

In fact, they consume almost a quarter of the world’s total fabrication gold per year, sometimes more – the most for any country by a long way.

The majority of the gold in India is transformed into high quality, chunky jewellery pieces, mostly necklaces, rings and earings, however some is stored as wealth in the form of bullion.

Indian demand for gold is highest around the traditional wedding season in October and November.

Last financial year India increased its gold imports, which had slipped slightly in the previous three years, to more than 580 tonnes of fabrication gold according to Gold Fields Mineral Services (GFMS), a London-based specialist commodity research and consulting company.

In the same year GFMS estimated the world supply of gold was 4,124t.

Predictably, the sub-continent is a choice market for most of the world’s gold traders.

But trading gold with India can be tough. Profit margins are low and direct trading is highly competitive, with buyers able to seek out very good prices because of the country’s high demand and its popular status among the world’s gold traders, according to Brian Bath, chief executive officer of Australia’s main gold refiner, ARG Matthey.

Although a little surprising, India’s competitive marketplace may have something to do with why WA’s direct gold exports are only just beginning to scrape the surface of India’s phenomenal appetite for gold.

Last year’s 25t of WA gold sold to India represented only about 13.5 per cent of total WA gold sold.

While this is a substantial increase on WA’s previous three years of direct gold trade with India, it is small compared with India’s mammoth demand.

The amount of WA gold directly

exported to India over the past fours years has increased substantially, according to the ABS.

Since the 1999-2000 financial year, WA’s exports of non-monetary gold have risen from $A3 million to more than $A410 million.

One reason for Australia’s recent increased gold trade with India is Asia.

Traditionally, Asian gold demand had been very strong and Australia has not really had to look too far to sell its gold, however since the Asian crisis in the late-1990s, other markets have been sought.

AGR Matthey says it has been more focused on the Indian market for the past three years.

But the fact that one of the world’s largest gold producing states and the largest gold consumer do such small trade seems problematic and is, in fact, not directly true.

A lot more WA gold does actually end up around Indian necks or dangling from their ears, because much of Australia’s gold is still sold to international banks or Asian trading houses, many of which trade the gold with India, and therefore would not figure in the ABS statistics.

And despite a weaker demand in the global jewellery market, mainly due to slumps in East Asia and Italy as well as recent sluggish world economic growth, forecasters are predicting India’s demand to only continue to strengthen.

The Australian Bureau of Agricultural and Resource Economics (ABARE) manager of minerals, energy and commodity forecasting, Andrew Maurer, said a better monsoon season last financial year produced better farming conditions across the country, which in turn stimulated the increase in Indian fabrication gold demand.

Mr Maurer said another good monsoon season was predicted for India this year, and coupled with ABARE’s forecasted falling gold price, even higher Indian gold demand should be stimulated.

GFMS reports that Indian imports are rising, despite high global prices, mainly due to the rupee hardening against the US dollar.

“Indian imports are currently being driven by a financing mechanism that exploits the out of kilter rupee/USD forward rate,” Perth-based GFMS metals analyst Tim Spencer said.

“AGR have been a recipient of new players wanting to source gold for that market.”

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