Gold imports at 7-month high in July as jewellers replenish stocks

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India's gold imports rose for the first time in seven months in July after a fall in prices ahead of a jewellery exhibition prompted jewellers to replenish stocks, provisional data from metals consultancy GFMS showed.

The 44.2 per cent year-on-year jump in gold purchases to 75 tonnes last month by the world's second-biggest consumer could support global prices, which on Monday dropped to 17-month lows.

But higher gold imports may widen the South Asian country's trade deficit and put further pressure on its currency, the rupee that hit a record low of 69.89 against the dollar on Monday.

"The recent rise in imports was due to the stock building due to lower prices ahead of the jewellery show and in anticipation that the rupee may continue to weaken till 71 rupees," said GFMS analyst Cameron Alexander.

A five-day India International Jewellery Show, where jewellers showcased designs to buyers, was organised last week in Mumbai.

"Jewellers were not buying in June expecting a big drop (in prices). In July, the correction attracted jewellers, who were on the sidelines," said a Mumbai-based dealer with a private bullion importing bank.

Indian gold prices fell to their lowest level in six months in July.

For the first seven months of 2018, the country's gold imports fell 28 per cent from a year ago to 406.2 tonnes, data compiled by GFMS showed.

Indian gold demand is set to improve in the second half of the year after falling 6 per cent in January-June, as government steps to boost farmers' incomes are expected to lift rural buying power, the World Gold Council said earlier this month.

Imports will remain robust this month as peak festival season is approaching, said Mukesh Kothari, director at bullion dealer RiddiSiddhi Bullions in Mumbai.

Demand for gold usually strengthens in the final quarter of the year as India gears up for the wedding season as well as festivals such as Diwali and Dussehra when buying the precious metal is considered auspicious.