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India imported almost double the amount of gold this August as it did during the same month last year. While weakening prices have prompted jewellers to stock up before the festive season, experts say that the tremendous rise in gold import could put the Indian rupee under severe pressure and increase the country’s trade deficit. Market experts say the gold imports in August were the highest over the past five months.

Higher imports by the world’s second biggest bullion consumer could support benchmark gold prices, which have corrected nearly 12% from an all-time high of $2,072 in August 2020.

Reasons for rising import

One reason for the huge rise in gold import seems to be the lifting of lockdowns ahead of the festive season compared to the situation last year. According to reports, India imported 121 tonnes of gold last month which was almost double what it had imported in August last year – 63 tonnes. In pure value terms, it is $6.7 billion versus $3.7 billion of gold imports in August last year.

Market experts say that a correction in gold value, which fell to Rs 45662 per 10 gms in early August, the lowest since May this year, was one of the reasons for imports going up.

Many experts have spoken about the markets making solid recoveries compared to last year, most of which were shut down due to the first wave of Covid-19. This year with lockdowns being lifted in a phased manner, the resumption of market activities has induced a positive business sentiment ahead of the festive season.

Gold import forecast

Many bullion experts expect gold imports in September to rise over 80 tonnes as the festive season approaches if gold prices remain stable. The gold imports for the same month last year were only 12 tonnes.

India’s gold imports in the first eight months of 2021 tripled to 687 tonnes from the lower base of 2020, when the Coronavirus outbreak forced authorities to impose a nationwide lockdown, according to a market expert.