New Delhi/Mumbai: India’s gold imports in August plunged 73 percent from a year ago to the lowest level in three years as a rally in local prices to a record high and a hike in import duty curtailed retail purchases of the precious metal, a government source said on Wednesday.
Lower imports by the world’s second-biggest consumer could cap gains in global prices that are trading near their highest level in over six years, but help the south Asian country in bringing down the trade deficit and supporting the rupee.
India imported 30 tonnes of gold in August, down from 111.47 tonnes a year ago, the source said, who was not allowed to speak to the media. In value terms, the country’s imports in the month fell 62 percent to $1.37 billion, he said.
On Wednesday, local gold futures hit an all-time high of 39,770 Indian rupees ($556.29) per 10 grams, taking their gains to more than 26 percent in 2019.
Retail demand has been subdued for the past few weeks due to the price rise, said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji.
“A few consumers are selling gold. Scrap supplies have risen substantially,” he said.
India’s gold demand is likely to soften in the September quarter as record-high local prices curtails buying, the World Gold Council said last month.
In August, dealers were offering a discount of up to $37 an ounce from official domestic prices, the biggest since August 2016. The domestic price includes a 12.5 percent import tax and 3 percent sales tax.
“Legal imports are falling due to smuggling. The price rise and duty hike have been increasing smuggling,” said a Mumbai-based dealer with a bullion importing bank.
New Delhi raised an import tax on gold by 2.5 percentage points to 12.5 percent in July’s federal budget, effectively increasing smugglers’ margins.
Indian customs officials seized 1,197.7 kg of smuggled gold in the April-June quarter, up 23 percent from a year ago, a government official said on Monday.
India’s gold imports in September could be less than 35 tonnes, down from last year’s 81.71 tonnes, the dealer said.