Concerns that the decrease could weigh on global prices have increased, as India is the second-largest importer of gold after China. On the flip side, lower imports could help the South Asian country reduce its steadily declining trade deficit.
Sudheesh Nambiath, a senior analyst with GFMS, a division of Thomson Reuters, stated, “higher prices and weak demand from rural areas squeezed imports.” Two-thirds of India’s gold demand comes from rural areas.
According to Bloomberg, shipments plunged 47 percent from 121 tons to 64.2 tons in March. Additionally, imports in the first three months totaled 159 tons, down 42 percent from a year ago.
While demand is expected to increase in April due to wedding season and India’s auspicious gold-buying day of Akshaya Tritiya, rising global prices have wilted shipments. The gold price is up almost 4 percent year-to-date.
“There isn’t that crazy, mad rush to purchase gold for Akshaya Tritiya as we have seen in the past, but we are expecting balanced and decent buying,” said Saurabh Gadgil, chairman of PN Gadgil Jewellers.
“There’s been a regular flow of advance orders for the auspicious day, some helped by the bullish outlook for prices because of global uncertainties and US-China trade tensions,” he added.
Consumption of gold has been falling in the country as an economic decline has left people holding back on spending. Demand was originally hit by a cash ban in 2016 and the implementation of a goods and services tax last year.
While there is slight optimism that the market will pick up again, Gadgil does not see that happening until November. He said, “in reality, we are looking at Diwali when things should pick up.”
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.