India’s gold imports increased sharply – up fourfold – in April, according to Bloomberg, citing a source within the Indian Finance Ministry. Shipments of gold into the country rose to 98.3 metric tons, more that four times the 22.2 tons for the same period last year. In April 2016, import volume was crippled by a lengthy jewelers strike in protest of an excise tax on gold jewelry.
This year, demand was initially hampered by the Modi government’s demonetization move that took the country by surprise. The government eliminated large denomination bills, severely reducing gold jewelry purchases in the Indian economy, which are mostly driven by cash.
Consumers are adjusting their buying patterns to the new monetary policies and are beginning to shift their gold buying to credit cards. Prior to this period, few Indian citizens carried credit cards. Prior to demonetization, cash transactions for gold amounted to 80 percent of the market. That number has dropped to approximately 50 percent as more Indian buyers turn to credit cards for purchasing their gold. After demonetization, the Indian economy stalled. As the money flow has begun to increase and gold prices have retreated from recent highs, there’s been plenty of demand built into the gold markets.
Demand has also been driven by an increase in the value of the Indian currency, as the rupee’s recent rise has worked to offset some of the price increases for gold to Indian buyers. The World Gold Council has revised its estimates for annual gold purchases in India this year to the higher end of their previously estimated range of 650 to 750 tons.
The latest UBS Global Precious Metals Report noted that India’s gold demand recovery suggests a healthy upside trend. The recovery […]