Dore makes up majority of gold sales

Chennai: Having recorded a 25 per cent rise in 2018, dore imports, for the first time in India, accounted for majority gold consumption by the domestic sector. Imports by both banks and premier export houses declined last year.

Of the total gold imports of 757 tonnes in 2018, 512 tonnes was consumed by the domestic market. Of this, 281 tonnes or 55 per cent was supplied by refiners, who had imported gold in the dore form.

Gold dore is a semi-pure alloy which is refined for further purification. Refined gold bars are manufactured from gold dore bar. According to precious metals agency GFMS, this is the first time that refiners accounted for the majority of domestic demand. Dore imports have been growing for the past eight years with the emergence of gold refineries.

The gold contribution from dore rose 25 per cent in 2018, while the total bullion supply from banks and nominated agencies stood at 231 tonnes, against 438 tonnes in 2017 - the lowest level recorded in the country’s history. Nominated agencies imported only 53 tonnes of gold for domestic consumption against 135 tonnes in 2017 - a drop of 61 per cent. Supply from banks too contracted 41 per cent year-on-year to 179 tonnes.

Several star export houses under the nominated agency category lost their licence to import bullion for domestic consumption in October 2017 and this led to a decline in total imports in 2018. Many of them were allegedly involved in round-tripping of gold.

Further, refiners enjoy better margins on duty differentials of 0.65 per cent when compared to banks and nominated agencies. They also use Merchandise Export and Import Schemes (MEIS) while importing doré and this too supports margins.

According to Debajit Saha, Senior Analyst, Precious Metals Demand, South Asia and UAE, GFMS, the 25 per cent increase in shipments of dore demonstrates the clear paradigm shift occurring within India’s gold market. “The premium that Indian refiners are paying to overseas suppliers enables them to establish a strong network to import the raw material as per the required dema-nd in the market,’ he said.

However, India has only one LBMA accredited refinery which sources dore from large miners. GFMS believes that a significant portion of the dore imported by other refiners is sourced from small and artisanal mines, which can be risky.