India’s October gold imports surged 60% from a year earlier to a 31-month high as a drop in prices ahead of a key festival prompted jewellers to ramp up purchases, a government source said on Monday.
Higher imports by the world’s second-biggest bullion consumer could support benchmark gold prices XAU=, but may also widen India’s trade deficit and put pressure on the ailing rupee INR=D4.
India imported 123 metric tons of gold in October, compared with 77 tons a year earlier, the source said, declining to be named as he is not authorised to speak to the media.
The average monthly imports in October in the past decade were around 66 tons.
In value terms, October imports nearly doubled to $7.23 billion from $3.7 billion a year earlier, he said.
At the start of October, local prices MAUc1 fell to their lowest level in 7 months, providing an opportunity for jewellers to stock up for festivals, said a Mumbai-based bullion dealer with a private bank.
“Jewellers were operating with lower stocks and were eager to replenish at the reduced price levels observed in October,” he said.
Indians celebrated the Hindu festival Dussehra in October and Diwali last week, when buying gold is considered auspicious.
Local gold futures MAUc1 jumped to a record high of 61,914 rupees per 10 grams in November, but demand remained robust during Diwali, said Amit Modak, CEO at jeweller PN Gadgil and Sons in the city of Pune.
There was strong demand for coins and bars as people viewed gold as a long-term investment product, leading to increased purchases, he said.
In November, gold imports could drop to 80 tons, which would still exceed last year’s 67 tons, given the improving demand during the upcoming wedding season, the bank dealer said.
Weddings are one of the biggest drivers of gold purchases in India as bullion in the form of jewellery is an essential part of a bride’s dowry and also a popular gift from family and guests.