Gold imports by India, the world’s biggest market after China, jumped to the highest level since 2014 in the first three months of the year, spurred by jewelers restocking for weddings and improving cash flow in the financial system, the World Gold Council said. Net inbound shipments more than doubled to 270.1 metric tons from 127.4 tons a year earlier, council data showed Thursday. That’s the biggest amount since the 279.5 tons imported in the fourth quarter of 2014.
Domestic demand gained 15 percent to 123.5 tons in the first quarter, and “if this trend continues and there are no sharp changes in prices,” purchases may be at the upper end of the range of 650 tons to 750 tons estimated for 2017, according to P.R. Somasundaram, the council’s managing director in India.
Consumption is recovering after plunging to a seven-year low of 666.1 tons in 2016. Imports last year tumbled 39 percent to 557.7 tons after buyers reduced spending on jewellery because of higher prices, the government’s measures to increase transparency in the financial system and a crackdown on black money.
The rupee’s appreciation significantly shielded Indians from sharper price increases, as buyers returned to the market after weak demand in 2016 following the government’s measures against unaccounted wealth, he said. Opportunistic purchasing by investors and an increase in restocking in addition to forecasts for a normal monsoon probably mean healthy demand for gold in the first half, he said.
“There are definite speed breakers like the uniform goods and services tax, which could interrupt this trend,” Somasundaram said in a phone interview from Mumbai on Wednesday. “The very fact that you are moving to a new form of taxation will definitely impact the bullion trade.”
The goods and services tax, expected to be implemented from July, will replace more than a dozen domestic levies that were dividing the world’s fastest-growing large economy, drawing India for the first time into a common market with more than 1 billion consumers. Bullion is bought during festivals in India and for weddings as part of the bridal trousseau. Imports in March probably more than quadrupled from a year earlier as jewelers stocked up anticipating demand for weddings.