After a disappointing drop in demand in 2016, Reuters reports that India's February gold imports surged to 50 tonnes, up more than 82% from a year ago, on pent-up jeweller demand and as retail consumers ramped up purchases for weddings, provisional data from consultancy GFMS showed on Wednesday.
India's gold imports had fallen to 27.4 tonnes in February 2016 as buyers postponed purchases in anticipation of a reduction in the import duty in the budget at the time. This February, retail demand improved due to the wedding season and as cash supplies became normal, said Bachhraj Bamalwa, a jeweller based in the eastern Indian city of Kolkata.India's gold imports in 2016 had fallen nearly 44 percent versus 2015 to 510.4 tonnes, the lowest level in 13 years.
"Last year was an unusual year. This year consumption and imports will rise as jewellery demand has been recovering," said Bamalwa.
The rise in imports by the world's second-biggest consumer of the precious metal will support global prices that are trading near their highest level in 3-1/2 months, but could widen the South Asian country's trade deficit.
"Pent-up demand on the ease of the cash crunch and wedding related demand lifted imports in February," said Sudheesh Nambiath, a senior analyst at GFMS, a division of Thomson Reuters.
Notably the India physical premium-to-spot has stabilized around 10% after spiking on Modi's demonetization efforts.
As PiercePoints' Dave Forest notes, the demonetization effect had been weighing on India's gold markets even into January. But the strong February import stats show that the worst may now be over, with Indian consumers making their way back to the market. The most critical point is that this increased buying is happening even as gold prices are holding relatively high - with an ounce of gold currently selling for near $1,250, not far off the $1,350 peak we saw during the past year. When gold ran from $1,050 in early 2016 up those heights, reports suggested many Indian buyers were holding off in hopes of lower rates. But this week's news shows those holdouts may now have given up the wait, and decided to accept today's prices as a new normal. The February buying still isn't a barnburner - with the 50 tonnes imports during the month working out to just 600 tonnes annualized. But the year-on-year increase is encouraging.
Reuters notes, however, that imports in March could fall as a recent rally in prices has started deterring buyers.
"Consumers are struggling to adjust with higher prices. They are postponing purchases expecting a correction in prices," said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler based in Kolkata.
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