Informist, Thursday, Sep 26, 2024

By Sandeep Sinha

MUMBAI – Gold imports in India nearly tripled to 123-127 tn in August, from 43.6 tn in July, as jewellers stocked up on the yellow metal ahead of the festival season, according to trade and industry sources. Jewellers also sought to lower their average buying cost following the import duty cut, and build stocks anticipating a rise in prices, they said. The country had imported 86.2 tn of gold in August last year, commerce ministry data showed.

"The primary drivers of demand include the onset of the festival and wedding seasons, which traditionally boosts gold demand, along with importers stockpiling gold in anticipation of further price increases driven by global inflation and geopolitical uncertainties," said Prithviraj Kothari, managing director of RiddiSiddhi Bullions.

The October contract on the Multi Commodity Exchange hit a new lifetime high of 76,000 rupees per 10 gm on Wednesday, from the low of 67,400 rupees per 10 gm touched on Jul 27. Similarly, COMEX December contract hit a fresh all-time high of $2,708.7 per oz earlier today, or over 10% gain from Aug 1.

The surge in gold imports can be attributed to the reduction in import duties announced towards the end of July and increased seasonal demand for gold ahead of the festival period, Kavita Chacko, research head, India, World Gold Council, said in a note.

Finance Minister Nirmala Sitharaman had lowered the import duty on gold and silver to 6% from 15% during her Budget speech on Jul 23. Kothari said that a weakening rupee prompted higher imports as importers sought to avoid costlier purchases in the future. "Relatively stable global gold prices, despite being near record highs, also encouraged importers to capitalise on current rates," he said.

Trade data released by the commerce ministry on Sep 17 showed the value of gold imports rose 103.7% on year to $10.06 bln in August, from $4.94 bln a year ago. The monthly provisional data released by the ministry gives the import data only in value terms. In value terms, bullion was the second-biggest imported commodity in the country, accounting for 15.6% share of the total foreign exchange outflows, after petroleum in August.

The country's gold imports in Jan-Aug rose 7.6% on year to around 473.8 tn against 439.8 tn in the same period a year ago.

During Jan-Jul, for which official data is available, Switzerland was the largest bullion exporter to India, followed by the United Arab Emirates, South Africa, Peru and the Dominican Republic. During the period, the country imported 120.80 tn gold from Switzerland, 73.37 tn from the UAE, 35.55 tn from South Africa, 31.93 tn from Peru, and 18.05 tn from the Dominican Republic, commerce ministry data showed.

"Jewellery demand in the coming days is likely to remain strong, despite gold prices being near record highs, due to several factors. The upcoming festival season, including Diwali and the wedding season, is culturally significant for gold purchases, and this traditional demand is unlikely to be heavily impacted by high prices," Kothari said.

Chacko said that the purchases previously deferred are now materialising, and there is increased interest in heavier pieces of jewellery.

While some price-sensitive buyers may opt for lighter-weight jewellery or smaller purchases, the overall demand for gold is expected to stay robust. Additionally, consumers might shift towards investment-grade gold products like coins and bars. Still, the cultural importance of gold jewellery during festivals and weddings will continue to drive strong demand, Kothari said. End

US$1 = 83.64 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Aditya Sakorkar

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