Indian Gold Imports Higher on Reserve Bank Loosening Restrictions

India now accounts for roughly 25 percent of total global gold demand.

Bullion.Directory precious metals analysis 2 April, 2015
By Christopher Lemieux
Senior Analyst at Bullion.Directory; Senior FX and Commodities Analyst at FX Analytics

Gold demand from both India and China is huge and often tracked for ideas as to how world demand for the yellow metal will trend. Because of India’s growing trade deficits and current account widened, the Reserve Bank of India had issued harsh restrictions and tariffs on gold imports, which account to 90 percent of the nation’s demands.

However, the Reserve Bank has loosened restrictions which has already impacted gold import data. January’s import data shows that gold imports jumped 55 percent year-over-year to 52.7 tons from 39 tons in December. In dollar terms, total imports amounted to $1.55 billion, resulting in an 8.1 percent jump year-over-year and 15.9 percent month-over-month, respectively.

This is positive for the gold market as the flow of gold remains from East to West. However, global disinflation is still causing issues for gold prices.

China has seen inflation cut in half over the last two years, while India’s inflation is just over five percent from nearly 13 percent in the end of 2013 and averaged eight percent since 2005.

Cultural aspects for the two nations’ love for gold is well established, but broader demand is seen as a way to limit the affects of wild currency swings, among other reasons.

The previously strict restrictions caused a huge black-market trade in gold with people going as far as swallowing gold in order to take it over the Indian border.

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