India Heads into Gold Buying Season With Massive Pent-Up Demand
Indian Gold Imports Down from 76% from April to July
As India heads into its traditional fall gold-buying season there is probably enormous pent up demand. India relies almost entirely on imports to satisfy its gold demand. Gold imports into India in recent months have been down over 75%.
Higher gold prices, a crushing 10% gold import tariff and a weaker Indian Rupee are the most likely culprits to blame for the dramatic fall in Indian gold imports this year. As the fall wedding and gold festival buying seasons approach, however, the lack of gold imports and buying earlier in the year will most likely reverse as Indians purchase gold for these events.
The 10% gold import duty has been in place since 2013. Despite the 10% duty, Indian gold imports soared in 2015, perhaps because falling prices offset the 10% duty. This year’s surge in gold prices seems to have curbed Indian demand. The price of gold in recent months has stabilized in the $1300-1350 per ounce range. The Indian Rupee reached a four month high this week, making conditions ripe for Indians’ re-entry into the gold market.
Further, the fortunes of Indian farmers has improved this year as a result of a far better than average monsoon or rainy season that will help boost farmers’ crop yields and hence their discretionary income that they can use to spend on gold.
The price of gold this year has risen despite the low levels of Indian gold buying. Prices rose on the back of record western gold exchange traded funds buying. With Indian gold purchases delayed most of 2016, it seems Indians are ready to rejoin the global gold buying party.
The amount of gold purchased by Indian is enormous. Estimates range from 18,000-20,000 tons of gold are in the hands of Indian citizens. This gold has been accumulated over the centuries by dutiful gold buying by Indians, especially rural Indian farmers without access to banks who purchase gold as a means of wealth preservation and give gold as an auspicious symbol of prosperity.
Indians buy gold in increments of “tola”. A tola is a unit of measurement equal to 180 grains, 11.6666 grams, or 3/8 of an ounce, 0.375 troy ounces. Pamp Suisse, a world leading bullion brand, has released a new ‘Lady Fortuna’ one tola sized .9999 fine gold ingot just in time for the Indian gold buying season. You can learn more about these tola gold ingots and purchases them by clicking on the graphic below.
Indian gold import data from The Indian Ministry of Commerce and Industry and GFMS Thomson Reuters.
This article by BGASC is not, and should not be regarded as, investment advice or as a recommendation regarding any particular course of action.