Gold imports made by India fell for a sixth month in June 2018 to 44 tonnes from a drop in the value of Indian rupee in the past month, as per a Reuters report. The information on imports was gathered from provisional data from GFMS analysts at Thomson Reuters and bank dealers.
Lately, despite the correction in international prices, the yellow metal sold locally in India has remained high due to a fall in the rupee against the US dollar. The Indian currency fell to an all-time low against the dollar in the last week of June.
Notably, the price of the precious metal has increased by 5 percent this year in India so far. The consistently high price and a shift in Indian investment habits could have caused the year-on-year purchases of gold by the second largest consumer of the metal in the world to drop by 25 percent.
The well performing American economy and a hike in interest rates by the US Federal Reserve made the US dollar stronger. This then resulted in the weakening of the Indian rupee, making gold a less attractive investment than US treasuries to foreign investors and made gold expensive in non-dollar currencies. With factors against the precious metal, its international price fell to a seven-month low last week.
Additionally, lower gold imports may help India cut its trade deficit. In June 2016, 58.9 tonnes of gold were imported to meet the demand jump ahead of the implementation of the new sales tax-GST that became effective from 1 July 2017.
Purchases in the month of June 2018 could have also been curbed due to the inauspicious month of Adhik Maas in the Hindu calendar that ended on June 13. Purchase of gold and important events like weddings are commonly avoided by Indians during the period.
The Reuters report also suggested that India's imports in July could rise to 55 tonnes as the jewellery industry starts replenishing inventory.
In the first half of 2018, India's gold imports fell by 38 percent from a year ago period to 318.2 tonnes as per the data collected by Thomson Reuters.