- The domestic gold price was 10.3% higher in August compared to July, outpacing the LBMA gold price which rose by 7%
- Indian gold imports reached just 28.2t in August 2019 – 70% lower than the same month last year and lowest level since January 2018
- With elevated domestic gold prices and a higher custom duty, the discount in the local gold market widened out as far as US$55/oz in August
- Monsoon rainfall is 5% above Long Period Average (LPA) with Kharif sowing just 0.2% lower than last year; normal monsoon and healthy sowing bodes well for rural gold demand in Q4 2019.1
Another tough month for consumer demand
Following weak domestic retail demand in June and July, the gold market continued to face headwinds in August. The rally in the domestic gold price to record levels continued to exert pressure on consumer buying. The spot gold price (995 fineness) maintained its positive trajectory and touched a record high of Rs38,579/10gm on 26th August. The price finished the month 10.3% higher than at the end of July and year-to-date has increased 19.6%.
And the Indian economy is faltering. Leading indicators such as PMI manufacturing index, core sector growth, trade balance and INR have been on a downward trajectory. The slowing economy has also impacted sales volumes of large FMCG companies (such as Hindustan Unilever, Marico, Dabur), primarily led by lower rural growth. Confidence has also taken a hit, with the consumer confidence level falling to 95.7 in July from 97.3 in May.2 Weaker passenger car sales and motorcycle sales also pointed towards a slowdown urban and rural demand (Chart 1).