India's gold imports halved in August due to weak rupee, volatile prices

India's gold imports in August halved from a year ago as volatile local prices and a weak rupee prompted consumers to postpone purchases, a government source told Reuters on Tuesday.

While lower imports by the world's second-biggest bullion consumer could weigh on benchmark gold prices, the drop may help in limiting India's trade deficit and support the ailing rupee.

The country imported 61 tonnes of gold in August, compared with 121 tonnes a year earlier, the source said on condition of anonymity as he is not authorised to speak to the media.

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In value terms, August imports fell to $3.52 billion from $6.7 billion a year ago, he said.

For the first eight months of 2022, India's gold imports fell to 597 tonnes from 691 tonnes a year ago, the official said.

"Buyers were struggling to understand the trend. Prices rose suddenly in the first half of the month and then came down in the second half," said a Mumbai-based dealer with a private bullion importing bank.

Local gold futures rose to Rs 53,113 per 10 grams, their highest in nearly four months, but later fell to their lowest in a month at Rs 50,333.

Demand was weak in August and throughout the month gold was trading at a discount, said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji.

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In August, dealers offered a discount of up to $14 an ounce over official domestic prices — inclusive of the 15 per cent import and 3 per cent sales levies, dealers said.

Demand has been improving in September because of the price correction and the upcoming festivals, Jain said.

Indians will be celebrating Dussehra, Diwali and Dhanteras in October, when buying gold is considered auspicious.