Ahead of the peak demand season, Indian jewelers are adopting a wait-and-see approach to gold buying, anticipating further price declines, according to MMTC-PAMP India, the country’s largest precious metals refiner.
Samit Guha, CEO and managing director of MMTC-PAMP India, a joint venture between state-owned MMTC and Swiss refinery PAMP, noted that major jewelry chains, which typically drive sales, have not yet fully resumed purchasing.
Gold prices dipped below $4,000 an ounce last week, marking the first time since July, and extending a 24% decline since the US-Iran war began in late February, after previously surging to a record $5,400 in January.
Guha explained that large jewelers usually increase purchases when prices rise to secure supplies before they become costlier, and conversely, reduce inventories when expecting prices to fall.
This year, demand for gold in India, the world’s second-largest consumer, has been muted due to the government’s decision to more than double the import duty to 15% in May, as well as Prime Minister Narendra Modi’s appeals to curb purchases and mitigate a widening trade deficit.
As India relies heavily on gold imports, the higher duty has also led to an increase in under-the-counter cash transactions.
According to Guha, “The increase in duty has impacted purchases for us.”
In contrast to China, where household demand has increased as prices declined, India’s cautious approach is notable, particularly as the country enters its strongest purchasing period, typically between October and December, with Diwali falling on November 8 this year.
Citi Research expects India’s gold imports to be curbed due to stricter import regulations and weaker rural demand following El Niño-driven monsoon disruptions.
The research firm forecasts shipments of approximately 106 tons from October to December, roughly half the historical average of 212 tons for the fourth quarter.
MMTC-PAMP’s gold sales are currently below last year’s levels, with a preference for smaller coins and bars, according to Guha, who added that September sales were comparable to the previous year, while October has seen a slight increase in buying.
Guha stated, “If gold rebounds, we will see buying.”