The sharp slowdown in India’s gold imports in December comes on the heels of record purchases in November, driven by strong demand for investment and jewellery. The drop in imports is expected to be over 50%, following a surge in prices that prompted buyers to delay purchases. This slowdown could potentially cap the rally in global gold prices, which hit a record high in October.
The surge in imports in November, which reached a record $14.8 billion, widened India’s trade deficit and pushed the rupee to an all-time low. However, with prices rebounding in December, buyers are hesitant to make purchases, leading to a significant drop in imports. Local prices declined in mid-November but have since rebounded, discouraging buyers.
The weak demand has prompted Indian dealers to offer discounts on gold prices, compared to premiums charged in November. Investment demand was robust in November, as bullion offered better returns than the stock market. The festive season demand also drove imports in November, as jewellers aimed to replenish stocks following the festivals of Dussehra and Diwali.
Overall, the slowdown in gold imports in December could help India narrow its trade deficit and support the rupee, which has been struggling due to external factors. It will be interesting to see how the market reacts to this slowdown and how it impacts global gold prices in the coming months.
