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2018 Indian Gold Imports Strong Again

Gold News
Indian Gold Imports Topped 700 tons through November 2018.

Indian gold imports continued at a robust pace in 2018, climbing to 718 tons though November 2018. India gold imports of 901 tons were up 55% in 2017 from 582 tons in 2016. Through November, 2018 Indian gold imports are tracking slightly behind 2017’s pace.

Elevated gold prices in the first quarter of 2018 dented Indian gold demand and imports. In contrast, lower gold prices in May and June caused a spike in Indian gold imports as Indian gold imports moved sharply higher. Indian gold imports spiked in May to 83 tons as the price of gold fell from its highs earlier in the year. The price of gold has fallen further since May, and June imports of 59 tons also show an increase of 10% year over year, July imports were up 25% year over year and August gold imports of 95 tons were up 107% year over year. 2018 September gold imports bested 2017’s while October and November gold imports in 2018 were slightly behind 2017’s totals.

According to preliminary reports, higher gold prices slowed in Indian gold imports in December and January.

Indian Gold imports rose 55% in 2017 to 901 tons from 582 tons in 2016. Indians tend to hold off on gold purchases when the price rises and buy more when the price drops. 2016 was a year that saw rising gold prices due to Brexit. Those rising prices crimped Indian gold imports which are a good proxy of Indian gold demand because India relies almost exclusively in imports to satisfy its gold demand as it has no domestic gold mining production.

Indian Gold Reserves are the Tenth Largest in the World

The Reserve Bank of India began purchasing gold in 2018 ending a nine year hiatus of adding gold to reserves.

Gold reserves by country top twenty January 2019
The Reserves Bank of India holds approximately 580 tons of gold.

Indian gold demand is also sensitive to the severity of the monsoon season. Strong rainfall helps swell crop yields which in turn gives rural Indian farmers more rupees which many of them use to buy gold to store their wealth. According to reports, farmers’ fortunes this past winter have been dented by oversupply and in some instances failed crops due to lower than normal rainfall during the monsoon season.

In 2018, flooding that caused millions in property damage may have contributed to the decrease in gold demand and imports in October and November. The Indian government has been considering slashing the 10% import duty and goods and service tax (GST) on gold.

The World Gold Council estimates that about 190,000 tons have been mined in human history. This would mean that Indian citizens hold about 13% of the gold ever mined in the world, with more gold entering the country each year.

In addition, the import of Dore bars (rough gold procured directly from mines that is about 80% pure) into India is on the rise and is not counted in the official gold import numbers. About twenty Indian refiners take the imported Dore bars and refine then into gold suitable for jewelry and gold bars and rounds. Any increase in domestically refined gold from Dore, my impact negatively gold imports.

Indian Gold Imports by the Numbers

Despite rising gold prices and government efforts to reduce gold demand, India’s gold imports surged in 2017 to 901 tons up 54.8% from 2016 imports of 582 tons. Indian gold imports from 2008-2017 have averaged over 850 tons a year. Any time Indian gold imports increase, chatter among government officials begins discussions regarding raising additional tariffs or other plans to lower gold demand and imports. Due to the great demand for gold in India, gold often accounts for 10-20% of overall Indian imports, wreaking havoc with India’s balance of trade. This year’s decline has the government discussing reducing the tariff and or GST on gold.

The Indian government has tried to curb gold demand with a 10% gold import tariff instituted in 2013, and a variety of jewelry and goods and services taxes. The taxes have not had a noticeable impact on gold demand and have resulted in increased smuggling. It seems only higher prices slows gold demand in India.

India’s 901 ton gold imports in 2017 were approximately 29 million ounces.

Indian Household gold vs top government gold holdings

Indian household gold holdings far exceed the top gold holding nations’ gold reserves including India’s own central bank which holds 580 tons or the tenth largest gold holdings among nations.

India’s growing population and increase in income levels has created large and steady annual gold demand that shows no sign of abating. India launched a gold monetization scheme two years ago in an attempt to wrest some of that gold away from its citizens and temples. Under the scheme the Indian government offered Indians a chance to “loan” their gold to the government in exchange for interest payments. There was a tepid response from the Indian temples and little enthusiasm for the scheme among Indian citizen.

Tola Gold Bars – The Weight Used to Measure Gold in India

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This article by BGASC is not, and should not be regarded as, investment advice or as a recommendation regarding any particular course of action.