(Kitco News) – India's gold and silver imports nearly doubled from August to September despite record-high prices, according to trade and government sources.
Banks and jewelers raced to build up inventories this month ahead of festivals and expected higher taxes on imports at month-end.
"Jewellers and banks have been clearing a lot of gold from customs over the past two weeks,” an anonymous government official told Reuters. "We haven't seen such a rush in years." He added that the government is expecting even higher clearance on the last day of the month, ahead of the likely increase in the base import fees on both gold and silver.
The Indian government revises the base import price every 15 days, and it is used to calculate the import duty that must be paid.
Chirag Thakkar, chief executive of Amrapali Group, a leading precious metal importer in Gujarat, said banks and bullion dealers are rushing to clear imports before the new base price takes effect on Wednesday.
"Even with gold and silver hitting record highs, buyers kept chasing them, and investment demand surged," Thakkar said, adding that Amrapali Group more than doubled its gold and silver purchases in September from the previous month.
Experts warn, however, that the surge in imports could weigh on the weaker rupee and widen India's trade deficit. Trade ministry data shows India spent $5.4 billion to import 64.17 tons of gold and $451.6 million on 410.8 tons of silver in August. Trade data for September will be released in mid-October.
Indian jewelers stayed away from gold and silver for months, hoping for a price correction, but they are now being forced to pay a premium to stock up ahead of the festival season as prices hit fresh highs, according to a Mumbai-based dealer at a private bullion bank.
Indians will celebrate Diwali in October, during which it is considered auspicious to buy gold.
Indian dealers were charging a premium of up to $8 per ounce over official domestic prices this week, including the 6% import and 3% sales levies.
"Strong buying from India is surprising the market, especially as China remains inactive at these levels," said a Singapore-based bullion dealer.
In China, dealers actually widened their discounts this month to between $31 and $71 per ounce above global benchmark prices, the deepest discounts the country has seen in several years.
Spot gold topped out at $ 3,871.89 just before 3 am EDT on Tuesday but sold off sharply after it was unable to push higher after multiple attempts. Spot gold last traded at $3,836.12 per ounce for a marginal gain of 0.06% on the session.
Silver hit a high of $47.174 overnight in the spot market, but prices have come off during the European and American sessions. Spot silver last traded at $46.297 per ounce for a loss of 1.35% on the daily chart.
