India's gold imports plunged 68% year on year in September to their lowest in more than three years as record domestic gold prices curbed retail buying, a government source said on Friday. Lower imports by the world's second biggest consumer could cap gains in global prices that are trading near their highest level in over six years, but help New Delhi in bringing down the trade deficit and supporting rupee.
The south Asian country fulfils nearly all its gold demand through imports.
India imported 26 tonnes of gold in September, down from 81.71 tonnes a year ago, the source said, who is not authorised to speak to the media. In value terms, September imports fell 51% to $1.28 billion, he added.
In September, local gold futures hit an all-time high of 39,885 rupees ($562.10) per 10 grams, taking their gains to more than 26% in 2019.
Retail demand was weak in September because of higher prices and the Shradh period, which is considered inauspicious for buying bullion, said a Mumbai-based dealer with a bullion importing bank.
In September, sluggish demand forced dealers to offer a discount of up to $51 an ounce from official domestic prices, the biggest since August 2016. The domestic price includes a 12.5% import tax and 3% sales tax.
Gold imports are likely to increase in October as jewellers make purchases for festivals, said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji.
Demand for gold usually strengthens in the final quarter as India gears up for festivals such as Diwali and Dussehra.
India's gold imports in October could rise due to festivals, but could still be less than 50 tonnes and down from last year's 57 tonnes, said a bullion dealer based in New Delhi.
"Higher prices may force consumers to cut down purchases. There is need of hefty price fall to boost demand," he said.