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Informist, Tuesday, Dec. 17, 2024

 

By Sandeep Sinha

 

MUMBAI – Gold imports into India are likely to have climbed over 200% on year to 170–178 tonnes in November from 56.67 tonnes a year ago, according to trade and industry sources. The sharp rise was primarily due to high investment demand as investors shifted from the riskier equity market to the safety of the yellow metal, they said. Festival and wedding jewellery demand, a correction in gold prices, and an escalation of tension between Ukraine and Russia also boosted the gold demand.

 

"The main reasons can be the discontinuance of sovereign gold bonds, good monsoon, shifting of funds from the equity market to gold, expectation of higher returns and stability in real estate prices. The gold exchange-traded fund also shows an increase in the numbers due to the tax rate cut in debt funds in Budget 2024. Needless to say, the exchange-traded funds are also backed by gold, which also resulted in higher imports," Surendra Mehta, national secretary at India Bullion and Jewellers Association, said.

 

"Demand from festivals and weddings may be the primary reason for high imports, and it is unlikely to continue at the same level in the upcoming months. The other factors are customs duty reduction, rising bank demand, and asset diversification toward gold as a result of global uncertainty," Prithviraj Kothari, managing director of RiddiSiddhi Bullions, said.

 

The November imports were the highest in 44 months and were near an all-time high of 176.94 tonnes in March 2021. The country had imported 85.74 tonnes of gold in October, according to commerce ministry data. The commerce ministry is yet to detail gold imports in November in quantity terms.

 

"Our initial analysis shows that banks had imported gold in large quantities when gold prices slipped to $2,536 an ounce in the international market and at that time duty was also lowest at approximately INR 428,000 per kg," Mehta said.

 

Gold prices on the Multi Commodity Exchange of India corrected over 7% or INR 5,650 to INR 73,300 per 10 gm on Nov. 14 from the high of INR 78,950 per 10 gm on Nov. 1 and 9.2% or $261 an ounce on COMEX during the same period as the dollar rose on expectations of make-in-America policies by the incoming Donald Trump administration, continued outflow in exchange-traded funds, and rally in equity assets.

 

The import cut announced in the Budget in July boosted India's gold imports. According to Mehta, about 780 tonnes of gold have been imported in the first eleven months of 2024, of which 480 tonnes came in after the Budget. In July, Finance Minister Nirmala Sitharman announced a cut in import duty to 6% from 15%.

 

Trade data released by the commerce ministry on Dec. 16 showed that the value of gold imports climbed 331.4% on year to $14.86 billion in November. Monthly provisional trade data released by the ministry provides is only in value terms.

 

India imported gold bars worth $606.02 million in November, up 150.2% from a year ago, according to the latest data from the Gem and Jewellery Export Promotion Council. The country imported $36.11 million of gold jewellery in November, down from $44.11 million a year ago, the data showed.

 

In value terms, bullion was the second-largest imported commodity, accounting for 21.2% of total foreign exchange outflows in November, after petroleum, crude and products. In October, the share of gold in total imports was 10.7% at $7.13 billion. 

 

Kothari said gold is one of the best-performing assets in 2024 with an average yearly return of almost 25%. High imports show that investors have a high level of confidence in gold as a safe investment. India's merchandise trade deficit rose to a record high of $37.84 billion in November, mainly on account of the sharp jump in gold imports.

 

According to commerce ministry data, Switzerland was the largest bullion exporter to India in Jan-Oct, followed by the United Arab Emirates, South Africa, Peru, and the Dominican Republic. During this period, India imported 180.23 tonnes of gold from Switzerland, 172.75 tonnes from the UAE, 56.37 tonnes from South Africa, 55.86 tonnes from South Africa, and 26.82 tonnes from the Dominican Republic, according to commerce ministry data.

 

India, the second-largest consumer and importer of gold after China, imported 734.3 tonnes of yellow metal in 2023, up 2.9% from 713.31 tonnes a year before.  End

 

US$1 = INR 84.95

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

 

Edited by Saji George Titus

 

 

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