Gold demand in India tends to be weak as inflation and monsoon rains depress farm income

Gold sales in India are likely to be weak this year. This is because inflationary pressures and bad monsoon weather could worsen farmers’ incomes, reducing their ability to buy gold.

The livelihoods of millions of farmers in India depend on the monsoon season. This year’s unseasonal rains have affected yields in the agricultural sector, India’s largest gold consumer. The increase in import duties in July is another factor that has dampened gold demand in India, the world’s second-largest gold consumer.

According to forecasts, gold demand in 2022 will be virtually unchanged from the previous year. This is a decline from previous forecasts of 7-8% growth.

Gold consumption in India reached 800 tons last year. The relaxation of measures to prevent the spread of COVID-19 has led to a recovery in demand.

Rising demand and imports have put pressure on the Indian government to impose tariffs on gold imports to reduce gold inflows after the country’s widening trade gap pushed the Indian rupee to a record low.

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