Indian monthly official gold imports from January 2019 – May 2021
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A total of Rs 25,702 crore has been raised through the SGB Scheme till end-March 2021 since its inception
While the domestic gold prices ended 5.1% higher in May at Rs 48,993/10g, demand for gold collapsed amid rising second wave and lockdowns.
“The ferocious second wave of infections continued in May, leading to regional lockdowns in most parts of the country. The intensity of cases, particularly in metros/cities, as well as the rapid spread of infection across states, regions, and pockets of rural India, impacted demand throughout the month”, said Mukesh Kumar Senior Analyst, World Gold Council (WGC), India in a report published today.
Demand Destruction
As per the RBI Survey, the Consumer Confidence Index fell to an all-time low of 48.5 in May. “Retail demand on Akshaya Tritiya – the major gold buying festival, which fell on 14 May this year – crumbled due to store closures”, Kumar added.
With retail demand shattered due to localised lockdowns across states, the local market flipped to discount in May. The average discount during the month remained at US$4/oz compared to an average premium of $2/oz in April.
“By the end of the month, weak retail demand had pushed a few bullion dealers into providing a discount of up to $6-8/oz, the highest level since mid-September 2020”, said Kumar.
Declining Gold Imports
Indian official imports slowed and the local market flipped to discount. Indian official gold imports totalled 11.4 tonnes in May 2021 compared to a negligible 1.9t of imports in May 2020 – at which time imports were being hampered by global supply chain disruption and a pan-India lockdown. Official imports in May this year were 90% down on the April total of 110 tonnes.
Source: Infodrive India, Ministry of Commerce & Industry Govt. of India, World Gold Council
Slowdown In Gold ETF inflows
Monthly dollar inflows into Indian gold ETFs slowed to a six-month low in May. Inflows increased by 0.1 tonnes (Rs 290 crore comprising of inflows of $39 million) during May, taking total gold ETF holdings to 33.2 tonnes.
Mukesh Kumar said, “The BSE Sensex gained 6.5% in the month compared to a 1.5% decline in April. Higher returns lured investors towards the equity market resulting in monthly dollar inflows into gold ETFS slowing to a six-month low.”
Gold Outlook
Experts anticipate official gold imports to increase in June. The easing of state lockdown measures and the resumption of international flights are likely to encourage gold flows into the country.
“Retail demand may improve further as more states relax Covid restrictions, allowing consumers wider access to gold purchasing channels”, said Kumar.
Published: June 23, 2021, 18:02 IST