Demand for gold after the budget and imports fell to a three-year low

Mumbai, Ta. September 24, 2019, Tuesday

The September quarter of the current year has proved to be the worst for the country's jewelers. The increase in the import duty on gold while presenting the current fiscal year's budget, followed by the rising cost of gold and global factors resulted in gold prices being seen all-time high. The import demand for gold has dropped significantly due to duty and price hike.

Investors are currently shying away from investing in this precious metal as a result of high prices. As Dashera-Diwali festivals are approaching, jewelers have had a chance to suffer due to high prices, but import prices have gone down due to the import bill which is a relief news for the government. Reducing gold imports can be a major relief in the case of high crude oil prices, said one analyst.

On a monthly basis, the current year's gold import bill for August is $ 1.8 billion, which is a six-month low. On a yearly basis, the import bill for the first five months of the current fiscal year is $ 6.5 billion, a three-year low.

In terms of bullion traders and jewelers, the second quarter of the current fiscal year has been the worst for the industry over the past decade.

In the current fiscal year budget, import duty on gold has been increased from 5% to 8.5% and only then has the import of gold decreased. Talking about the current calendar year, India's gold imports during the January-June period stood at 8.5 tonnes, which is expected to be around 3.8 tonnes per month on average, but in July this figure dropped to 5 tonnes and 5 tonnes in August.

Of the 8 tonnes imported in July and August, 1 tonnes has been imported only for the domestic market while the rest will be used for re-exporting gold. This means that out of the $ 6.5 billion imports during July-August, only $ 8 billion has been paid for the domestic market for gold consumption.

Due to high import duty and high prices, smuggling of gold through smuggling has increased substantially at present, market circles said. Since smuggling gold is offered at a discount, official trade has also been impacted.