Mumbai: India’s gold imports have fallen nearly 24% in the first quarter and probably dropped at the same pace in April, the head of a major trade body said on Monday, as importers sit on stocks bought before global prices slumped towards two-year lows.
India is the world’s biggest buyer of bullion and its government has raised import duty by 50% to curb imports, which helped push the current account deficit to a record 6.7% of gross domestic product in the December quarter.
India imported 200 tonnes of gold in January to March, down 23.67% from the same period of last year, Mohit Kamboj, president of the Bombay Bullion Association, told Reuters. Last month’s imports will be 25% lower than the 71 tonnes shipped in April last year, he added.
Ahead of the tax increase in January, gold imports surged 23% year-on-year as buyers stocked up. But global and domestic prices have fallen as much as 15% since then, and gold sank to a two-year low on Monday.
“They are losing confidence in gold as prices have fallen to $1,439 (per ounce) from the top of $1,900 in the last one year,” Kamboj said.
“With more and more countries reducing stocks the future of gold seems bleak,” said Kamboj, referring to Cyprus and other countries in the European Union.
Internationally, investors have dumped gold and flocked to equity markets in recent weeks as Cyprus plans to sell gold reserves to raise around €400 million. That has raised concerns that other indebted euro zone countries could follow suit.
Even escalating tensions on the Korean peninsula have failed to burnish gold’s safe-haven appeal.
In India, buying has also been hit by a falling rupee, which makes domestic gold more expensive than its global counterpart, which is priced in dollars.
The rupee has eased about 1.5% against the dollar since 21 January when the import duty was hiked to 6%.
“All jewellers are seeing there could be a further fall, so they are waiting for Rs.25,000 ($460) levels,” said Kamboj, referring to the price per 10 grams.
Indian gold futures have not fallen below that level since September 2011, when they started a rally which took them to 2012’s record highs. The level has become something of a psychological floor as a result.
Indian gold futures hit Rs.27,100 per 10 grams on Monday, their lowest level since 31 December 2011 and about 17% down from their peak of Rs.32,464 struck in November last year. Reuters