Indian gold imports resume, demand recovery could support global gold and silver prices.

Multiple trade and government sources have revealed that Indian banks have resumed the import of gold and silver. Earlier, banks had suspended imports for over a month due to customs' requirement to pay a 3% Integrated Goods and Services Tax (IGST). Now, the banks have agreed to pay the tax, allowing imports to restart. The resumption of imports is expected to increase the amount of gold imports in India, widen the trade deficit, and put greater pressure on the rupee. Banks give up waiting for government exemptions, agree to pay tax for customs clearance A private bank's precious metals business head in Mumbai stated, "We have paid the 3% IGST to customs for clearing the gold and silver goods. The banks waited for over a month, hoping for a yearly exemption from the government to waive the 3% tax. But given the government's signal to restrict gold imports, the banks gave up hope." When the IGST system was implemented in India in 2017, banks importing gold were originally exempted from paying the 3% tax. However, starting from April 1 of the new financial year, customs started requiring banks to pay IGST, leading to the suspension of imports by banks. A government official stated that banks have started clearing gold and silver goods in recent days. The official, who was unauthorized to speak to the media, requested anonymity. Trade sources were also not authorized to make public statements. The official mentioned that after paying IGST, the banks have cleared around 9 tonnes of gold and 34 tonnes of silver from May until now. Chirag Thakkar, CEO of precious metals importer Amrapali Group Gujarat, stated that the improvement in bank imports has enhanced supplies, but demand remains weak, causing gold to trade at a discount. This week, Indian dealers are offering discounts of up to $17 per ounce on the official domestic prices, which already include a 6% import tax and a 3% sales tax. Due to the bank suspensions following the imposition of IGST by customs, India's gold imports for April may have dropped to nearly a 30-year low, around 15 tonnes. Modi urges "Do Not Buy Gold for a Year" to stabilize forex reserves With banks suspending imports, India's gold imports for April are expected to have dropped to a nearly 30-year low of only around 15 tonnes. This contrasts sharply with India's traditional position as the world's second-largest gold buyer. In the face of increasing pressure on the balance of payments and the rupee exchange rate, Indian Prime Minister Narendra Modi publicly called on people on Sunday to avoid buying gold for the next year to help conserve forex reserves. So far this year, the rupee has been one of the worst-performing currencies in Asia. With the resumption of imports, a further increase in gold purchases could widen the trade deficit, leading to new depreciation pressure on the rupee. From a global perspective, a recovery in Indian demand could support international gold and silver prices. As the second largest gold consumer after China, the normalization of Indian imports can help local jewelers replenish inventory and hedge against recent price volatility due to geopolitical risks and a stronger US dollar. However, analysts also point out that domestic demand in India remains weak, and gold and silver are still trading at a discount in the short term. A true rebound in demand may only be seen once inventory is depleted and the festival season approaches.