Kolkata: Gold imports, second only to crude oil in India’s overseas shopping basket, are expected to fall around 15% in September after Prime Minister Narendra Modi’s renewed appeal to avoid unnecessary spending on the yellow metal, potentially denting sentiment in the jewellery trade just ahead of the festive season.
“According to our trade estimates, nearly 45 tonnes of gold were imported in August. This is expected to come down by 15% in September,” said Surendra Mehta, national secretary, India Bullion & Jewellers Association.
Prime Minister Modi reiterated the appeal on September 1, asking Indians to exercise restraint and avoid spending unnecessarily on gold. The message comes as the government seeks to reduce the import bill and an expanding current account deficit, while encouraging households to bring a part of their estimated 31,000 tonnes of idle gold into circulation.
The appeal has cast a shadow over Zaveri Bazaar, the country’s largest gold trading hub. Jewellers expect consumers to increasingly exchange old jewellery for new pieces rather than make fresh purchases.
Old-gold exchange, which currently accounts for about 45-50% of jewellers’ business, could rise to 60-70% during the festive season, industry executives said.
High gold prices, volatility and growing caution over discretionary spending are prompting consumers to preserve cash while continuing to participate in festivals and weddings.
“India relies entirely on imported gold, making bullion one of the biggest import items after crude oil. When Indians buy more gold, a larger amount of foreign currency flows out of the country. That can add to the trade deficit, and when dollar demand is already high, put additional pressure on the rupee,” said Varghese Alukkas, MD, Jos Alukkas, which has 67 stores in South India.
‘Gold Exchange’
The shift towards exchanges could help sustain jewellery demand even if fresh gold purchases moderate.
“While consumers are becoming more mindful about discretionary spending, jewellery continues to hold a unique place in Indian culture. Festivals, weddings and key life milestones remain deeply cherished occasions, and jewellery is an integral part of these celebrations,” said Sandeep Kohli, CEO, Indriya.
“For Indian consumers, jewellery is more than a purchase; it is a symbol of love and tradition. That’s why we believe demand for the category will remain resilient even as spending patterns evolve. We are also witnessing a growing preference for jewellery exchange, with consumers exchanging their old pieces for new designs and high-value purchases,” he said.
Gold prices are adding to the uncertainty. Expectations of a September US Federal Reserve rate hike have risen to around 68%, pushing US bond yields and the dollar higher, while renewed US-Iran tensions have lifted oil prices and raised concerns over persistent inflation, said Vedika Narvekar, research analyst – commodities & currencies, Anand Rathi Share and Stock Brokers.
Gold fell nearly 1.8% on Tuesday and slipped below ₹1.5 lakh per 10 grams on the MCX on Wednesday, before recovering around ₹1,000 from the lows, indicating some buying interest at lower levels.
“The focus now shifts to upcoming US labour and inflation data, which will be important in determining the Fed’s next move,” Narvekar said. She expects gold to remain volatile with a cautious bias in the near term.
The immediate focus for investors is $4,300 an ounce in spot gold. Holding above that level could support a recovery toward $4,350-4,400, while a break below could open the way towards $4,200-4,220.
On the MCX, ₹1,47,700-1,48,000 is seen as a potential accumulation zone for staggered purchases.
