India's Gold Imports Fall By 76% In January To 32-month Low Due To Weak Demand

India's January gold imports fell 76 per cent year on year to a 32-month low due to subdued demand after domestic prices rose to record highs and jewellers postponed purchases in the hope of a reduction in import duty, according to a government source.

Lower imports by the world's second-largest bullion consumer may weigh on benchmark gold prices, but the drop may aid in reducing India's trade deficit and supporting the ailing rupee.

The country imported 11 tonnes of gold in January, compared to 45 tonnes the previous year, according to the source, who spoke on the condition of anonymity.

In terms of value, January imports fell to USD 697 million from USD 2.38 billion the previous year, he said on Thursday.

According to a Mumbai-based dealer with a private bullion importing bank, local gold futures hit a record high of 57,270 rupees per 10 grammes in January, stifling retail demand, which had been expected to improve amid the ongoing wedding season.

Weddings are a major driver of gold purchases in India, as bullion in the form of jewellery is an essential part of a bride's dowry as well as a popular gift from family and guests.

According to a New Delhi-based bullion dealer with a private bank, jewellers and bullion dealers hardly bought any bullion in the second half of January because they expected the government to cut the import duty on gold in its annual budget to curb an increase in smuggling.

In its budget presented on 1 February, India did not reduce import duties on gold but increased import duties on silver.

Local gold prices have dropped nearly 5 per cent from their all-time high, which has helped attract retail consumers, according to the New Delhi-based dealer.

“Imports would rise in February. Bullion dealers and jewellers must stock up for the wedding season,” he said.