Gold imports nearly double in August as prices dip ahead of festivals

India's gold imports in August nearly doubled from a year earlier to the highest in five months on strong demand and as weaker prices prompted jewellers to ramp up purchases for the festive season, a government source said.

Higher imports by the world's second-biggest bullion consumer could support benchmark gold prices , which have corrected nearly 12% from an all-time high of $2,072 in August 2020. The surge in imports could increase India's trade deficit and pressure the rupee .

India imported 121 tonnes of gold in August, compared to 63 tonnes a year earlier, the source said on Monday on condition of anonymity as he is not authorised to speak to media.

In value terms, August imports surged to $6.7 billion from $3.7 billion a year ago, he said.

A price correction in the first half of the month gave an ideal opportunity for jewellers who wanted to build inventories for the upcoming festive season, said a Mumbai-based dealer with a gold importing bank.

Local gold futures fell to 45,662 rupees per 10 grams on Aug. 10, the lowest in four months.

"Retail demand was good in August as coronavirus cases fell and people stepped out to shop," said Harshad Ajmera, a gold wholesaler in Kolkata.

Indian authorities had imposed localised lockdowns in the June quarter as COVID-19 infections surged to a record high, but allowed businesses to reopen in a phased manner as cases fell.

India's gold imports in the first eight months of 2021 tripled to 687 tonnes from the lower base of 2020, when the coronavirus outbreak forced authorities to impose a nationwide lockdown, the government official said.

The country's gold imports in September could rise above 80 tonnes from 12 tonnes a year earlier if prices remain stable ahead of festivals, said a Chennai-based bullion dealer.