Indian Gold Imports Year to Date Down 52% through September.
Indian imports jumped as it headed into its traditional fall gold-buying season. Gold imports in September rose 63% in September to 42 tons up from 26 tons in August, suggesting early Diwali buying. India relies almost entirely on imports to satisfy its gold demand. Gold imports into India in recent months had been down over 75%. September gold imports were the largest since January when 82 tons of gold were imported.
In 2016, Indian gold imports were curbed by higher gold prices, a crushing 10% gold import tariff and a weaker Indian Rupee. As the fall wedding and gold festival buying seasons approached in September, the lack of gold imports and buying earlier in the year seemed to have reversed. Gold had been trading at a discount for the past several months, but gold selling at the spot price and at slight premiums in India have been reported since late September, indicating a return of demand to the sub-continent.
This year’s surge in gold prices seems to have curbed Indian demand. The 10% gold import duty has been in place since 2013, but coupled with higher prices held down Indian demand. Despite the 10% duty, Indian gold imports soared in 2015, perhaps because falling prices offset the 10% duty.
In September the price of gold stabilized in the $1300-1350 per ounce range at levels near the highs of the year. In early October, however, gold fell over $75 an ounce, prompting a wave of buying. Early reports indicate that Indian gold imports may have swelled to 60 -80 tons in October. The Indian Rupee is also trading near four month highs, making conditions ripe for Indians’ re-entry into the gold market.
Indian farmers have enjoyed better fortunes this year as a result of a far better than average monsoon or rainy season that helps 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 rejoining 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.
This article by BGASC is not, and should not be regarded as, investment advice or as a recommendation regarding any particular course of action.