London — Indian gold bar imports fell 46% in June to 26 mt, from 50.1 mt in May, customs data showed Tuesday.
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Imports were down 40% year on year, from 44.6 mt in June 2015, to their lowest level since March.
Physical demand in India, the world's largest consumer after China, has struggled this year amid high prices and a running dispute with the government over new taxes and proposed reforms to the industry.
The discount paid for gold in India to the international price has moved to record levels in June and July, heard above $70/oz this week, as high spot prices continue to deter local investors.
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Previously unheard of discounts as steep as $100/oz for gold paid in cash have been reported in the past several days.
Gold has been on an unprecedented bull run this year, up around 30% since January 1, hitting a 28-month Friday of $1,375/oz.
Seen as long-term investors, Indian consumers are traditionally very price sensitive, as dealers and traders on the ground reported almost no volumes sold in June or July.
India consumed almost 1,000 mt of gold in 2015, but with gold bar imports at only around 215 mt so far this year, just under half the 2015 level, many are expecting a much lower total for full-year 2016.
HSBC said last week that a fall in emerging market physical demand should limit the upside of gold's bull run this year to around $1,400/oz. DORE IMPORTS REBOUND
Surprisingly given a huge drop-off this year, imports of gold dore -- unrefined gold ore -- jumped over fourfold in June to 44.6 mt, the highest in almost a year.
An increase in the tax rate in February on domestic precious metals refiners that had expanded under previously preferential regulation, resulted in a significant drop in gold dore imports this year, averaging only 5 mt/month of imports between March and May.
This compares with an average of over 35 mt/month in 2015.
Local refiners have reported closures, or at least a halt to imports until demand recovers, as a result.
However, some refiners are using the opportunity to import dore with high silver content to take advantage of rising silver demand.
Silver prices have outperformed even gold this year, up over 45% since the start of 2016, but at around $20/oz, represents an investment at a fraction of the cost.
Indian customs data backs up this trend, with almost half of this month's dore imports showing a silver purity above 70%.
Silver purity is typically less than 10% of India's dore imports, according to the data.
The London Bullion Market Association Gold Price settled at 1,352.85/oz Tuesday morning, down $4.25 from Monday's close.
The LBMA Silver Price settled at $20.47/oz Monday, up 75 cents/oz from Monday.
--George King Cassell, firstname.lastname@example.org
--Edited by Jonathan Fox, email@example.com