Gold imports may fall 25% in October -December

Weak festival demand takes shine off; lower purchases by India could drag global prices

India’s gold imports in the October-December quarter could drop by a fourth from a year ago due to weak demand during key festivals and as investors seek better returns from riskier assets like equities, industry officials and analysts said.

Lower gold purchases by India, the world’s second-biggest consumer after China, could drag global prices that have already fallen nearly six per cent from this year's peak.

“October imports were lower than last year and even in November and December they are likely to be lower than last year,” Sudheesh Nambiath, a senior analyst with GFMS, a division of Thomson Reuters, said on Wednesday.

India’s imports could fall to around 175 tonnes in October-December from 234 tonnes a year ago, Nambiath said.

In the first nine months of 2017, the country’s gold imports surged 131 per cent to 638.4 tonnes, according to GFMS data, as jewellers advanced buying in the first half of the year ahead of a sales tax hike that took effect from July 1.

Gold demand usually strengthens in the final quarter as Indians brace for the wedding season as well as festivals such as Diwali and Dussehra, when buying bullion is considered auspicious.

But appetite for the precious metal during Diwali was lower than normal, said Daman Prakash Rathod, a director at MNC Bullion, a wholesaler in Chennai in southern India.

Gold imports last month fell 10 per cent from a year ago to 75 tonnes, provisional data from GFMS showed.

“I do not see a big jump in imports in coming months. Overall demand is weak,” said Jayant Pawania, group executive vice president at YES Bank, a major bullion importer.

“People are parking more money in financial assets. Investment demand is very weak,” said Pawania, who also expects gold imports in the current quarter to be around 175 tonnes.

Indian shares have risen more than 26 per cent this year, hitting a record high earlier this month and attracting retail investors. In contrast, global gold prices have increased 11 per cent.

Lower Indian imports could weigh on gold prices, said Brian Lan, managing director at dealer GoldSilver Central in Singapore.

“With these figures down, you know that there is less support for gold prices. We didn't expect the fall to be this big, we expected some support from the Indian market,” Lan said.