India imported just 37.7 tonnes of gold in July according to figures released by the World Gold Council, dropping a huge 49% as compared to the imports in the same month a year earlier and 39% lower than the imports of the previous month. Gold demand within the country as well as imports are expected to remain muted in August and September, the WGC said.

In an analysis of this performance, Mukesh Kumar, a member of the Market Intelligence Group of WGC writes, “There was understandably little demand for gold in July due to an elevated domestic gold price and a higher custom duty.”

Kumar said that this was a “seasonally quiet period for Indian gold demand”, and on account of all this, “the discount in the local gold market reached a peak of US$ 28/oz in July“.

By July end, prices were 2.3% higher than at the end of June, and year-to-date has increased 23%, Kumar states.

In addition, he notes, “Imports were further dampened by muted demand from rural communities, who diverted their spending towards the sowing of Kharif crops.” 

Giving a break up, WGC reports that bullion accounted for the lion’s share with 7.4t imported during the month, while six refineries imported a meagre 3.4t of gold doré (fine gold content).

Most of the bullion was sourced from Switzerland (69%) and the UAE (19%) in July. But gold doré imports came from a wider range of sources, including Africa, Middle East and Latin America. The prominent gold doré exporting countries to India were Tanzania, Saudi Arabia and Bolivia – accounting for a combined 82% of gold doré imports in July.

On the other hand, Kumar notes an increase in investor interest with trading volumes on MCX reaching an all-time high of 46.8t on 5th July (more than three times the average volume of 15.2t in June).