India Gold Imports Hit 5-Month High
India’s gold imports hit a 5-month high of 121 tons in August, a further sign of recovery in the world’s second-largest gold market.
This comes on the heels of gold imports totaling 72.3 tons in July.
August gold imports nearly doubled the total from a year ago. In August 2020, India imported 63 tons.
India’s gold imports in the first eight months of 2021 tripled to 687 tonnes compared to 2020 when the pandemic hammered the Indian economy.
The price of gold in rupees corrected in late July and early August, offering a buying opportunity for Indian jewelers and investors.
Analysts expect imports to remain strong in September as the festival season approaches.
According to Reuters, “Higher imports by the world’s second-biggest bullion consumer could support benchmark gold prices.”
India ranks as the second-largest gold-consuming country in the world, second only behind China, but the gold market has languished over the last couple of years. The pandemic crushed demand, particularly for gold jewelry. But even before coronavirus, record-high gold prices in rupee terms and government policy put a drag on the gold market. There were signs of a turnaround late last year and it continued through the first quarter of 2021. The second COVID-19 wave stalled the gold market’s recovery in India, but it appears to be regaining steam with growing retail demand and a surge in gold imports.
Indian states began relaxing lockdown measures in mid-June. Wedding purchases helped drive strong demand early in July. Demand eased somewhat later that month primarily due to a lack of wedding dates, but picked up again in August.
Indians traditionally buy and hold gold. Collectively, Indian households own an estimated 25,000 tons of gold and that number may be higher given the large black market in the country. The yellow metal is interwoven into the country’s marriage ceremonies and cultural rites. Indians also value gold as a store of wealth, especially in poor rural regions. Two-thirds of India’s gold demand comes from these areas, where the vast majority of people live outside the official tax system.
Gold is not just a luxury in India. Even poor people buy gold in the Asian nation. According to an ICE 360 survey in 2018, one in every two households in India purchased gold within the last five years. Overall, 87% of households in the country own some amount of the yellow metal. Even households at the lowest income levels in India own some gold. According to the survey, more than 75% of families in the bottom 10% had managed to buy gold.
Gold served as a lifeline for many Indians during the pandemic.
The Indian government’s response to the first wave of COVID-19 ravaged the economy. As a result, many banks were reluctant to extend credit due to fear of defaults. In this tight lending environment, many Indians used their stashes of gold to secure loans. As Indians battled the second wave of COVID-19, many Indians sold gold outright in order to make ends meet.
Indians understand that gold tends to store value and that ultimately gold is money. If they have gold, they know they will be able to get the goods and services they need – even in the event of an economic meltdown. And while westerners may not embrace the cultural and religious aspects of the Indian love affair with gold, the economic reasons for their devotion to the yellow metal are every bit as applicable in places like the US.