India?s gold imports slumped more than 80% in June from the previous month as official measures, coupled with absence of festivals, curbed demand in the world’s top consumer, a senior government official said on Monday.
Imports dropped to 31.50 tonne in June compared with 162 tonne in May and 142.50 tonne in April, the official told FE, citing a quick trade estimate. The provisional import and export estimates for June are expected next week.
The imports in June are lower than even the levels forecast by bullion industry executives. The All India Gems and Jewellery Trade Federation had predicted gold imports for June to be in the range of 37-40 tonne while a top Bombay Bullion Association executive had forecast purchases between 40 and 50 tonne. The country had imported roughly 50 tonne in June last year.
?Gold imports were very high in April and May, but June imports saw a major decline because of restrictions by the Reserve Bank of India (RBI) and the government. In April and May, anticipatory purchases had soared in the run-up to the wedding season, which led to a rise in imports then,? said an official with the State Trading Corporation.
However, analysts said that India is a price-elastic market and any drop in gold prices could spark a scramble for purchases and drive up imports, as witnessed in mid-April.
Last month, the government raised the import duty on gold to 8% from 6%, marking an effective eight-fold hike since early January 2012, and the central bank extended restrictions on gold imports on a consignment basis to agencies, in addition to banks, with a view to allowing purchases from overseas ?only to meet the genuine needs of the exporters of gold jewellery?. RBI also directed that all letters of credit must be opened by the designated banks or agencies for gold imports only on a 100% cash margin basis.
The measures came after imports had exceeded 300 tonne in just two months of the current fiscal, partly stoked by huge purchases following a drop in international prices since mid-April.
Global gold prices dropped 23% between April and June, posting their biggest quarterly loss on record. The metal has lost 27% since January and 10% since US Federal Reserve chairman Ben Bernanke offered the most explicit signal on June 19 to start rolling back the bullion-friendly stimulus programme later this year. However, an over 13% weakening of the rupee since May has partly erased gains for domestic consumers.
Moreover, gold demand in the country is traditionally subdued in June and July, starts picking up gradually in August and reaches its peak during the Diwali.
The government is worried particularly about the fact that an ?idle? asset like gold has been pressuring the country’s current account deficit. Finance minister P Chidambaram has also asked people to shun gold purchases. The country?s CAD scaled a peak of 6.7% of the gross domestic product in the quarter through December 2012 and hit a record 4.8% in the fiscal year through March 2013, compared with 4.2% in 2011-12.
The current account comprises the balance of trade, net factor income such as interest and dividends, and net transfer payments.
Gold inches up in intraday trade
Gold rose on Monday as investors were back after a two-day slide caused by heightened concerns about the Fed scaling back stimulus measures earlier than expected, but a strengthening dollar kept gains for the precious metal in check. Gold and the dollar traditionally follow an inverse relation.
Spot gold gained 0.3% to $1,226.70 an ounce by 0944 GMT while Comex August gold futures edged up $12.60 to $1,225.10. In Delhi, however, prices dropped by R75 to R26,550 per 10 grams, tracking the metal’s beating in the last session.