After a purchase in April of 5.6 tonnes, the Reserve Bank of India (RBI) has not disclosed any buying in gold for its reserves. A rise in its price is a possible reason.
According to data from the International Monetary Fund’s International Financial Statistics, the RBI has held 618 tonnes of gold since April.
Indian consumers had brisk buying in the April-June quarter but July import was down from 72 tonnes a year before to 38 tonnes. News agency Reuters quoted a government official on Wednesday that August gold import is estimated at 30 tonnes, a three-year low. In August 2018, import was 111.5 tonnes.
The price of gold is up by 25 per cent in rupee terms over a quarter. In April-July, first four months of this financial year, gold's import bill rose 15.5 per cent.
Somasundaram P R, managing director for the India arm of the World Gold Council (WGC), says: “Gold already faces muted demand due to the 25 per cent increase in prices in terms of the Indian currency in recent months that naturally deters buying. Any further curb (on import) will add to the negative sentiment underpinning forecasts of economic growth and employment. Imports are already at a multi-year low, replaced by rising levels of recycled or scrap gold, which might touch unprecedented levels in 2019.”
Recycled or old gold sale has seen a sharp increase. In the June quarter, such sale against cash was 37 tonnes and is only increasing. A trader at the Zaveri Bazar here says where the average trader was getting two kilos of old gold in a day, it is now 10 kilos a day.
According to a WGC report issued on Wednesday, central banks generally slowed their gold buying in July, till when the latest data is available. Alistair Hewitt, its director of market intelligence is quoted as saying, “Net purchase of gold by central banks in July was a modest 13.1 tonnes. This is 90 per cent less than June and the lowest level of monthly net purchase since August 2017.”