Gold prices head into 21 month high, but plunging rupee drops Gold imports by 25%

Last Updated: Fri, Jul 06, 2018 22:15 hrs
Gold Shop (IANS photo)

Mumbai/Delhi/Chennai: Gold prices have steadily increased for the fifth straight session.

Spot prices touched $1255.9 an ounce in the international markets, but in the domestic Gold markets had been quoting a premium. 

Bullion was up by Rs 10 to Rs. 31,580 per 10 grams at markets in New Delhi while sovereign Gold remained unchanged at Rs 24,800 per eight grams.

The 22 Karat variant was selling Rs 23920 in the national capital (22 Karat). The yellow metal retailed the most costliest in Kolkata at a price of Rs 24112.

The rise in prices has been attributed to the weakening of the Indian Rupee.

Data released by Thomson Reuters suggests that the Rupee nose-diving in the past week may have propelled prices of the Yellow metal to a 21 month high.

India, the second largest global consumer of Gold after China however, has seen imports dropping.

Data from GFMS,  a division of Thomson Reuters, reveals gold imports fell for a sixth month in June to 44 tonnes amid the backdrop of rupee diving to record lows, and Gold prices escalating to a near 21-month high. Many jewelers are reported of dropping out from stocking the yellow metal and consumers too are reportedly reconsidering their investments in the yellow metal.

Last year India imported 58.9 tonnes of gold in June 2017. This was owing to a jump in demand around the implementation of the Goods and Services Tax.

Reasons for a drop in imports have been attributed to the rising rupee as well as cultural reasons such as the arrival of Adhik Maas. Adhik Maas is a Hindu ritual, marked as a period inauspicious to invest in Gold, and even buying property.

Lower gold imports are expected to help the Indian Rupee South cut trade deficit. Gold is among the top five consumed products that has to be imported. The others include Crude, which has also been in the news for a continual hike.

Imports have skiddled by 25% year-on-year, despite, international spot prices dropping in the rise of a surging US Dollar. This owing to the slump in the Indian Rupee

While the Indian rupee hit record low during the last week of June and lost nearly 8% in 2018, the local gold prices have risen more than 5% so far in 2018.

A Reuters report quotes a Mumbai-based head of the gold trading desk at a private bullion importing bank as saying, "The rupee kept local prices elevated despite the correction in global prices."

The data reveals that India has so far imported 318.2 tonnes, which is down by 38% when compared with the similar timeframe last year. But there is an assumption among a section of the industry, including bankers and traders that imports could jump up to 55 tonnes since most inventories need to be replenished.

If the Gold demand increases alongside fluctuations in exchange rates, there is a probability for local Gold rates to head north.

For those of you keen to check the weekly Gold rates across the major cities, here is a chart to check out the prices.

22 Karat, Price across 4 major cities of India

* Rates in Hyderabad and Chennai are almost the same.
* For other cities, please visit the Sify Gold Rates app or visit our homepage.

Although the rising Rupee is a matter of a concern for many including the RBI, a handful economists believed that the RBI could contain the challenge.

The RBI had intervened in during August 2013 when the Rupee breached the Rs 68 per dollar mark (68.82). Back then, the RBI governor Raghuram Rajan launched an NRI bond scheme to attract the much-required dollars into the Indian market.

Ajit Ranade, an economist writing for the Mumbai Mirror, believes there is no need to panic about the falling rupee.

He reasons that the Rupee tends to lose 3-5% every year since India's inflation is higher than the US'. The Rupee naturally loses purchasing power quickly in comparison to the US Dollar. 

A higher dollar rate will certainly be cheered by India's IT and Pharmaceuticals sector, considered the biggest export churners. But a higher dollar rate and cheaper Gold will be sugar rush for the gems and jeweler sector, which exports a sizable chunk as Gold jewelry every month.

Gold rate in india

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