India’s gold trade deficit widens as gold import shoots up

Indian households are once again hoarding gold, pushing up the import bill and widening the trade deficit. The country’s trade deficit widened to $122 billion in April-November 2021, as gold imports shot up despite its still elevated prices.
The gold import bill for the first eight months of the current fiscal year soared 170% compared to the same period of 2020-21 and so did the trade deficit. 
Significantly, demand for gold climbed even as international prices soared. Gold prices began their rise as the pandemic wreaked havoc across the world and investors fled stock markets. International gold prices continue to stay elevated due to the rise in inflation. It has, however, come off the all-time high of $2,057 an ounce in August 2020 to trade at $1,750-1,850 in recent months.
The World Gold Council estimates that the Reserve Bank of India bought 41 tonnes of gold in the second quarter of the current fiscal, raising its holding to 745 tonnes. It estimates that 2021 will see the biggest rise in India’s official reserves of gold since 2009 when it purchased 200 tonnes from the International Monetary Fund.

Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough&Polished