Higher imports by the South Asian country could support global prices that have risen more than 12% so far in 2019 but could also widen India’s trade deficit and put pressure on the rupee. India fills most of its gold demand through imports.
Imports were down 16% from November 2018, however, he added. Gold prices corrected after the Deepavali festival, giving an opportunity for jewellers to replenish inventory, said Mukesh Kothari, director at Mumbai bullion dealer RiddiSiddhi Bullions. The country celebrates Dhanteras and Deepavali in October, when retail demand for gold peaks as it is considered auspicious and invokes lasting prosperity. In November, local gold futures fell to 37,477 rupees ($522.18) per 10 grams after hitting an all-time high of 39,885 rupees in September. In value terms, November imports totalled $2.94 billion, slightly higher than last year’s $2.76 billion, the source said. According to a Mumbai-based bullion dealer at a gold importing bank, gold started trading at a premium in India to the official domestic price last month for the first time in 5-1/2 months on an improvement in demand from jewellers, which prompted refiners to increase imports of gold dore (a semi-pure alloy which is refined for further purification. Refined gold bars are manufactured from gold dore bars).
“Imports were not attractive for refiners until October due to massive discounts. As gold started trading in premium, they increased imports,” he said. Dealers charged a premium of up to $1.5 an ounce over official domestic prices in November, compared with a discount of up to $21 an ounce in October.