Arbitrageurs bump up gold imports

After a lull of several months, gold imports almost doubled in August to 60 tonnes as demand from arbitrageurs and large investors surged when the gold prices were shooting up.

Against 32.1 tonnes in August last year, imports were almost double at 60 tonnes and the highest in eight months. Even in terms of value, imports were more than double at $ 3.7 billion against $ 1.37 billion.

Imports were almost negligible in the past few months of lockdown and restrictions. In May the country had imported 1.4 tonnes and in June, 11 tonnes. By July, the imports had moved up to 30 tonnes.

According to an industry expert, arbitrageurs and large investors were active in the market as the gold prices were going up. They have been trying to use the arbitrage opportunity on import tariff rate which is revised every 15 days. They have been expecting that the prices will further move up. But they are now stuck with the gold after prices fell.

“Large investors have been buying bars and coins in July and early August when the gold prices were shooting up. However, when the prices fell in a matter of days, the market came into a discount. Currently, gold is available at a discount of $ 50 per ounce,” said Vipin Raina, president, bullion sales and trading, at MMTC Pamp.

However, the demand among the end consumers have not picked up yet as has been evident from the dullness at the jewellery stores. “This is a tell- tale evidence of the disconnect between the fundamental market of gold consumers and people who use the metal for arbitrage purposes. This has been happening due to the absence of an appropriate trading system,” said the expert.