India’s gold imports are anticipated to witness a drastic decline of over 90% in March compared to the previous month, reaching their lowest levels since the onset of the COVID-19 pandemic. The significant drop in imports, driven by record-high gold prices dampening demand, is poised to impact global gold prices, potentially curbing a recent rally fueled by expectations of interest rate cuts by the Federal Reserve. The substantial reduction in gold imports, a key driver of India’s trade deficit, is expected to support the Indian rupee and aid in narrowing the trade gap.
Projections indicate that gold imports in March 2024 could plummet to 10-11 metric tons, a stark contrast to the 110 metric tons imported in February. Air traffic restrictions and lockdowns during the pandemic had previously constrained gold imports, and the current scenario reflects weakened demand and reluctance among jewellers to purchase gold at elevated prices. Domestic gold prices in India surged to a record high of 66,943 rupees per 10 grams, prompting bullion dealers to offer discounts exceeding $35 per ounce.
The subdued demand is further exacerbated by jewellers refraining from purchasing gold from banks amidst high prices, with refiners scaling back imports of gold dore due to unviable refining margins. The prevailing market conditions underscore the challenges faced by the Indian gold industry, with subdued demand and soaring prices influencing import dynamics and trade activities.