What Factors Are Driving India's Lowest Gold Imports Since COVID? All You Need To Know
India's gold imports are anticipated to plummet by over 90 per cent in March compared to the previous month, marking the lowest level since the onset of the COVID-19 pandemic. This significant decline comes as banks curtail imports following a slump in demand sparked by soaring prices, relayed by a government official and two bank dealers to Reuters.
The diminished imports from India, the world's second-largest consumer of gold, could potentially restrain the surge in global prices, which reached unprecedented highs earlier in the month amidst expectations of interest rate cuts by the Federal Reserve.
Moreover, this decline in imports may contribute to India's efforts to narrow its trade deficit and bolster the Indian rupee. According to an unnamed government official, gold imports are expected to dwindle to merely 10 to 11 metric tons in March, a stark drop from the 110 metric tons recorded in February.
The prevailing circumstances have led to a near standstill in customs clearance for gold imports this month, as revealed by the government source. Two bullion dealers based in Mumbai corroborated this, citing weak demand as the primary reason for their minimal gold imports in March.
According to The Economic Times report quoting Reuters, with domestic gold prices reaching a record high of 66,943 rupees per 10 grams earlier in the month, dealers have resorted to offering substantial discounts of about USD 38 per ounce over official domestic prices, including taxes.
Traditionally, March witnesses robust gold demand as jewellers stock up for the ongoing Indian wedding season. However, the exorbitant prices have deterred jewellers from making purchases, even with offered discounts.
Furthermore, the practice of exchanging old jewellery for new has also dwindled due to the elevated prices, leading to a cessation in gold purchases from banks by jewellers.
The impact extends to gold refiners, who have nearly halted imports of gold dore, a semi-pure alloy, owing to their inability to provide substantial discounts. Harshad Ajmera, proprietor of JJ Gold House in Kolkata, noted that despite a lower import duty on gold dore compared to refined gold, the prevailing market discount renders refining economically unviable.