India’s gold imports drop to lowest level since pandemic

Lower imports by India, the planet’s second biggest buyer of the precious metal, gold, could restrict a rally in international prices that hit a record high earlier this month on anticipations that the Federal Reserve will cut interest rates this year.

Introduction

India’s gold imports are anticipated to experience a drastic decline in March, dropping by over 90% compared to the previous month. This significant reduction is attributed to various factors including record-high prices and subdued demand.

Reasons for Decline

1. Record-High Prices: The surge in gold prices has deterred consumer demand, prompting banks to scale back imports.
2. Global Price Rally: Global gold prices reached a record high recently amid expectations of interest rate cuts by the Federal Reserve, further dampening demand.

Impact on Global Prices

The substantial reduction in India’s gold imports is expected to curb the ongoing rally in global gold prices. India, being the world’s second-largest consumer of gold, holds significant influence over global demand and prices.

Trade Deficit and Currency Support

Lower gold imports in India could contribute to narrowing the country’s trade deficit and provide support for the Indian rupee. This reduction in imports might alleviate pressure on the currency and improve the country’s trade balance.

Projected Import Figures

March 2024 is poised to witness the lowest gold imports in India since the onset of the Covid-19 pandemic. Estimates suggest that imports could plummet to merely 10 to 11 metric tons, a stark decline from 110 metric tons recorded in February.

Insights from Government Official and Dealers

According to a government official, the current month’s gold deals are expected to be minimal, with only a negligible quantity being cleared from customs. 

Additionally, bullion dealers from leading gold-importing banks in Mumbai reported importing very limited quantities of gold in March due to subdued demand.

Conclusion

The sharp decline in India’s gold imports reflects the challenging market conditions influenced by high prices and weak demand. This trend not only impacts domestic consumption but also has repercussions on global gold prices and trade dynamics.