Why India’s gold imports are increasing

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Nov. 27 2019, Updated 1:44 a.m. ET

India’s gold imports

Along with China’s import data, India’s gold import data gives a solid direction regarding the physical gold demand in the Asian market.

India gold imports

Tracking gold imports

The value data for gold imports is reported by Reserve Bank of India (or RBI) every month. It shows India’s physical gold demand. India imports ~90% of the gold it consumes. It’s the major component of India’s trade deficit. India’s government imposed a 10% import duty on gold’s value. It also placed other restrictions on gold imports.

September gold imports up 450% YoY

Despite all the curbs, gold imports increased by ~450% year-over-year (or YoY) in September. Gold imports came in at $3.75 billion. Gold imports were $2.03 billion in August.

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The increase is mainly due to the recent slide in gold prices. It’s also due to the start of the festive season in India. The festive season starts in September. Last year, September imports were severely impacted by the import restrictions. The restrictions were imposed by government to control the current account deficit (or CAD).

After the large increase in gold imports, the government is thinking about increasing the import restrictions on gold imports in India. Import curbs led to a less gold demand in India last year.

More gold import restrictions will be negative for Indian gold demand. This could impact the gold prices (GLD) and gold stocks like Goldcorp Inc. (GG), Barrick Gold Corp. (ABX), Newmont Mining Corporation (NEM), Kinross (or KGC), Yamana Gold (or AUY), and ETFs like the Gold Miners Index (GDX).

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