Gold purchases set to fall sharply in December after record sales in November: Report
Mumbai: After gold purchases in India surged to record levels in November, a significant decline is expected in December due to the absence of major festivals and rising prices prompting buyers to postpone purchases, Reuters reported, citing trade and government officials.
A drop in imports by India, the world's second-largest gold consumer, could limit the rally in global prices, which hit an all-time high in October.
It could also help narrow India’s trade deficit and provide some support to the weakening rupee.
"Last month, imports shot up thanks to strong demand for investment and jewellery," President of the India Bullion and Jewellers Association (IBJA) Prithviraj Kothari was quoted as saying by Reuters.
Things are cooling off, and imports are slowing down in December with a drop of over 50%, he said.
Gold imports in November more than doubled from the previous month, reaching a record $14.8 billion.
This widened the trade deficit to a record level and pushed the rupee to its lowest-ever value.
Many buyers, who had been waiting for a price correction, rushed to purchase gold in November when prices fell, said a Mumbai-based dealer at a private bullion-importing bank.
Local gold prices dropped to Rs 73,300 ($863) per 10 grams in mid-November after hitting a peak of Rs 79,775 in October.
However, with prices rebounding in December, buyers are hesitant, and imports are likely to fall sharply to around $5 billion, the dealer added.
"So far this month, we have received fewer gold consignments for clearing compared to last month," a customs official told Reuters on condition of anonymity.
Weak demand has led Indian dealers this week to offer discounts of up to $8 per ounce over official domestic prices, which include 6% import duty and 3% sales tax.
In November, dealers were charging a premium of up to $16, the report said.
Investment demand was particularly strong in November as bullion offered better returns than the stock market, Kothari told Reuters.
India’s NSE Nifty 50 index fell to 23,263.15 points in November, down 11% from its record high on September 27.
Gold imports in November were also driven by jewellers restocking inventory following festive demand during Dussehra and Diwali, according to Amit Modak, chief executive of PN Gadgil & Sons, stated the report.
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