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India's Oct gold imports hit 31-month high on festival boost

Gold bars are displayed at a gold jewellery shop in the northern Indian city of Chandigarh.__Reuters
Gold bars are displayed at a gold jewellery shop in the northern Indian city of Chandigarh.__Reuters

MUMBAI: India's gold imports in October soared to a 31-month high, marking a 60% increase from the previous year, driven by a decline in prices ahead of a key festival that spurred increased purchases by jewelers, according to a government source on Monday.

The surge in imports by the world's second-biggest bullion consumer has the potential to bolster benchmark gold prices. However, it may also widen India's trade deficit and exert pressure on the ailing rupee.

India imported 123 metric tons of gold in October, a significant rise from the 77 tons recorded a year earlier, the source stated, requesting anonymity as they are not authorized to speak to the media. In comparison, the average monthly imports in October over the past decade stood at around 66 tons.

In terms of value, October imports nearly doubled to $7.23 billion from $3.7 billion in the corresponding period last year, the source added.

At the beginning of October, local gold prices reached their lowest level in seven months, providing an opportune moment for jewelers to replenish their stocks in anticipation of festivals, explained a Mumbai-based bullion dealer with a private bank. "Jewelers were operating with lower stocks and were eager to replenish at the reduced price levels observed in October," he said.

October witnessed the celebration of the Hindu festivals Dussehra and Diwali, occasions when buying gold is considered auspicious.

Although local gold futures reached a record high of 61,914 rupees per 10 grams in November, demand remained robust during Diwali, according to Amit Modak, CEO at jeweler PN Gadgil and Sons in Pune. There was notable demand for coins and bars as individuals perceived gold as a long-term investment, leading to increased purchases.

Looking ahead, the bank dealer suggested that November gold imports could decline to 80 tons, still surpassing last year's 67 tons, driven by improving demand during the upcoming wedding season. Weddings play a significant role in driving gold purchases in India, as bullion in the form of jewelry is an essential component of a bride's dowry and a popular gift from family and guests.__Reuters

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