InvestorQ : Why the demand for gold in India falling so sharply is and what does that do to gold imports?
Dilmini Mercia made post

Why the demand for gold in India falling so sharply is and what does that do to gold imports?

Answer
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Dhwani Mehta answered.
3 months ago


The Indian market is a price sensitive market and the sharp spike in gold prices to above Rs.49,000 per 10 grams has led to a sharp fall in the demand for gold. The uncertain market conditions have also contributed. With COVID-19 taking its toll on demand and gold prices at all-time high, gold imports for the quarter ended Jun-20 dropped 94% to $688 million.

The corresponding figure for gold imports for the quarter ending Jun-19 was $11.50 billion. Most of the jewellers in India rely heavily on gold imports to meet their gold demand. That demand has virtually dried up for the time being. Even silver imports were lower by 45% due to elevated prices as Indian consumers are getting cautious about precious metals.

But, there is a positive side to it. As a result of this sharp fall in gold imports, the trade deficit for the Jun-20 quarter is down to almost of a fifth of the previous figure at $9.12 billion. Normally, India imports 800 to 900 tonnes of gold annually and is the largest importer of gold. This is good news as the current account could again be in strong surplus in Q1.