India gold buyers postpone their purchasing plans, keenly waiting to see if Modi government cuts import duty in Union Budget

Indian gold demand stayed subdued due to elevated prices, with buyers delaying purchases in anticipation of a potential import duty cut in the forthcoming budget. Meanwhile, demand in China also saw a decline. Prime Minister Narendra Modi's government is expected to present India's budget in July.

"Expecting an import duty cut in the budget, some jewellers are postponing purchases. Besides, retail demand is very weak," news agency Reuters quoted Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji as saying.

In India, a significant gold consumer and importer, domestic prices hovered near Rs 71,600 per 10 grams on Friday, down from a peak of Rs 74,442 last month. Dealers offered discounts of up to $9 per ounce on official domestic prices, including 15% import and 3% sales taxes, compared to last week's $13 discount.

"The monsoon season has begun, and in rural areas, farmers are busy sowing summer crops. As a result, jewellery stores are experiencing lower foot traffic," said a Mumbai-based dealer with a private bullion importing bank.
In China, the largest consumer of gold, dealers applied premiums ranging from $12 to $23 per ounce above international spot prices this week, slightly lower than the range of $18 to $25 seen last week.

"Retail consumption in China has dropped significantly, mainly due to the high gold price and I believe it will pick up near to the end of third quarter when it is closer to the festive seasons in China," said Herman Chong, business development manager at Rotbart & Co, as per Reuters.

Gold Demand in India

The World Gold Council's latest update on India's gold market notes subdued demand post-festival peaks. Despite this, the market shows strength with active price movements, imports, and investor engagement. Global and domestic gold prices have shown resilience, marking a 12% year-to-date increase. After a peak in mid-May, international gold prices saw a minor dip but closed the month up 1% at USD 2,343 per ounce.

In India, gold demand surged during the Akshaya Tritiya festival on May 10, a traditional occasion for purchasing gold. However, this momentum quickly subsided as demand sharply declined post-festival. Record-high gold prices in mid-May further deterred buying, especially during the typically slow period from mid-May to July. Reports suggest strong interest in gold bars and coins due to positive consumer sentiment towards gold as an investment, while jewellery demand has diminished and is anticipated to remain subdued until the next festival season in late Q3.

Despite high price levels, gold imports in May continued to rise, reaching a value of USD 3.3 billion, a 7% increase from the previous month. However, this figure is 10% lower compared to May 2023, when imports totaled USD 3.7 billion amidst lower gold prices. In terms of volume, approximately 45 tonnes of gold were imported in May, a slight increase from 43 tonnes in April but notably lower than the 63 tonnes imported in May 2023. As the festival season approaches in the latter half of Q3, the gold market is anticipated to witness renewed activity.