India imported just 37.7 tonnes of gold in July according to figures released by the World Gold Council, dropping a huge 49% as compared to the imports in the same month a year earlier and 39% lower than the imports of the previous month. Gold demand within the country as well as imports are expected to remain muted in August and September, the WGC said.
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In an analysis of this performance, Mukesh Kumar, a member of the Market Intelligence Group of WGC writes, “There was understandably little demand for gold in July due to an elevated domestic gold price and a higher custom duty.” Kumar said that this was a “seasonally quiet period for Indian gold demand”, and on account of all this, “the discount in the local gold market reached a peak of US$ 28/oz in July“. By July end, prices were 2.3% higher than at the end of June, and year-to-date has increased 23%, Kumar states.
In addition, he notes, “Imports were further dampened by muted demand from rural communities, who diverted their spending towards the sowing of Kharif crops.”
Giving a break up, WGC reports that bullion accounted for the lion’s share with 7.4t imported during the month, while six refineries imported a meagre 3.4t of gold doré (fine gold content). Most of the bullion was sourced from Switzerland (69%) and the UAE (19%) in July. But gold doré imports came from a wider range of sources, including Africa, Middle East and Latin America. The prominent gold doré exporting countries to India were Tanzania, Saudi Arabia and Bolivia – accounting for a combined 82% of gold doré imports in July.
On the other hand, Kumar notes an increase in investor interest with trading volumes on MCX reaching an all-time high of 46.8t on 5th July (more than three times the average volume of 15.2t in June).
Courtesy - GJEPC