Sumit Guha, CEO of MMTC-PAMP India, reported a concerning situation in the gold market in India, stating that large chain stores have not fully returned to the market. Meanwhile, small and medium-sized jewelers are purchasing gold with frequent orders.
Decline in gold prices and its impact on purchases
The price of gold per ounce fell below $4,000 last week for the first time since July. This comes after gold prices reached a historic high of $5,400 in January of this year. Since the military incursion by the U.S. and the Israeli regime into Iran in late February, the price of this precious metal has decreased by about 24%. Guha added that large jewelers typically increase their purchases when prices are on the rise and reduce their inventory when they expect further price declines.
Demand in India and the impact of tariffs
Demand in India, the world's second-largest consumer of gold, has remained weak since the beginning of this year. This situation worsened after the Indian government raised the gold import tariff to 15% in May. Narendra Modi, the Prime Minister of India, has also urged people to reduce gold purchases to curb the country's trade deficit. The increase in import tariffs has also caused part of the gold transactions to shift to informal markets.
Guha emphasized that the increase in import tariffs has had a direct impact on the company's purchases. While household demand in China, the world's largest consumer of gold, has recently increased, India's willingness to buy gold has clearly decreased. This situation is a sign of market weakness ahead of the most important demand period of the year.
Gold purchases in India typically peak from October to December, coinciding with the Diwali festival, which will be celebrated on November 8 this year. According to forecasts, gold imports from October to December may reach about 106 tons, which is nearly half of the historical average of 212 tons imported in the fourth quarter of the year.
Guha also stated that the company's gold sales remain below last year's levels, with demand shifting more towards coins and small gold bars. Although the company's sales in September of this year were nearly equal to those of September last year, purchases have slightly increased in October. He concluded by expressing hope that if gold prices rise again, we will see an increase in purchases.
