India's Gold Import Slump: Record High Prices Dampen Demand

India's gold imports are expected to drop by 85% in February to a 20-year low due to record prices. This decline could help narrow the trade deficit and boost the rupee. Despite the ongoing wedding season, high spot prices and domestic market discounts led to reduced demand.

India is witnessing a significant decline in gold imports, with February figures projected to tumble by 85% from last year to their lowest in two decades. This slump is attributed to record high prices for the precious metal, affecting demand despite the ongoing wedding season, traditionally a period of heightened gold purchases.

The reduction in gold imports could play a crucial role in narrowing India's trade deficit and potentially support the faltering rupee, which hovers near a record low against the U.S. dollar. The country's reliance on gold imports, given its position as the world's second-largest consumer, underscores the impact of fluctuating international gold prices on its economy.

Industry insiders reveal that banks and jewelers have cleared minimal gold quantities from customs this month, with market conditions unlikely to change unless a price crash occurs in the coming days. As the U.S. market offers a premium, some banks have redirected their imports to cater to overseas demand rather than sell at a discount locally. The development comes as a surprise to many within the jewelry industry.

(With inputs from agencies.)