UBS: Indian Gold Inventories Run Down Amid Supply Restraints
Friday October 25, 2013 8:15 AM
Indian stocks of gold are drying up, but importers face challenges re-stocking due to government rules aimed at bringing down the current-account deficit, says UBS. The supply issues are becoming acute ahead of the Diwali festival season early next month, says the bank. “The view is that stocks from the large buying volumes in Q2 have been run down as imports dried up in the second half of the year amid the challenging regulatory environment,” UBS says. “These stocks would now be dwindling and the expectation is that they are likely to run out completely around November. While this situation would normally be encouraging due to the anticipation of re-stocking, the difficulties in importing gold right now suggest that this dynamic is muted. Instead, premiums are bound to rise.” The reality, says UBS, is that the supply chain in India “is currently too slow to keep up with what is expected to be strong physical demand during the Diwali holiday period.”