NEW DELHI/MUMBAI (Reuters) - India’s gold imports in January plunged 48% from a year earlier to their lowest in 4 months as a rally in local prices near record highs prompted buyers to curtail purchases, a government source said on Tuesday.
Lower buying by the world’s second biggest consumer of the precious metal could weigh on global prices trading near their highest level in almost seven years, but help New Delhi bring down the trade deficit and support the rupee.
India imported 36.26 tonnes of gold in January, compared with 69.51 tonnes a year earlier, the source said on condition of anonymity, as he was not authorised to speak to media.
In value terms, January imports totalled $1.58 billion, down from last year’s $2.31 billion, he said.
“Consumers are struggling to adjust with higher prices. They have risen too much, too fast,” said a bullion division head of a private bank, adding “Many potential customers are delaying purchases hoping prices will correct.”
Gold futures in India hit a record high 41,293 rupees per 10 grams in January after rising nearly a quarter in 2019.
The weak demand forced dealers to offer as much $13 an ounce discount over official domestic prices in January, the highest in nearly three months. The domestic price includes a 12.5% import tax and 3% sales tax.
The demand is unlikely to revive in the short-term unless prices fall significantly from the current level, said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji.
“Retail demand is muted. Even for weddings, people are cutting back on purchases,” Jain said.
Weddings are one of the biggest drivers of gold purchases in India as bullion in the form of jewellery is a popular gift.
India’s gold consumption in 2019 fell 9% from the previous year to 690.4 tonnes, the lowest since 2016, the World Gold Council (WGC) said last week.
India’s gold imports could fall below 40 tonnes in February as prices are still elevated, said a Mumbai-based dealer with a gold importing bank, which would mark a drop from last year’s 77.64 tonnes.
Reporting by Aftab Ahmed and Rajendra Jadhav; editing by Jason Neely, William Maclean