Indian gold traders call off strike after curbing March imports by as much as 80%

Gold traders and jewelers on Friday called off a three week strike after India's Finance Minister Pranab Mukherjee said the government will mull their demand to roll back excise duties on gold imports which were doubled in March.

Bloomberg quotes the Bombay Bullion Association saying Indian imports may have tanked over 80% in March and "could drop 40% in the second quarter."

The Wall Street Journal reports India said the tax changes were aimed at discouraging importers of the yellow metal to narrow the country's current account deficit. Only the value of India's crude oil imports top that of gold.

Last year India imported 969 tonnes of gold according to the World Gold Council, representing more than 90% of gold supply in the country (the remainder is from recycled gold and other sources).

According to the research by Australia’s Macquarie, Indian households are hoarding 18,000 metric tonnes of gold worth over $950 billion, representing 50% of the country’s GDP. Indian households own 11% of the global total and it is estimated that 7% – 8% of India’s 329 billion households held their savings in gold in 2009 – 2010.

The gold price has been under pressure recently due to the expected slump in Indian imports and disappointment over US Federal Reserve minutes released this week that showed a third round of monetary policy easing – so-called quantitative easing or QE3 – is not likely to happen.

The first round was in response to the financial crisis of 2008/2009 and QE2 ended in June last year. During that time the US central bank bought more than $2 trillion in debt and the price of gold rose 70%.

June gold contracts ended the holiday shortened week at $1,632 an ounce. Gold is down from its 2012 high of $1,790 an ounce hit at the end of February and an all-time high of just above $1,900 an ounce reached in September last year.