Modi asks Indians to stop buying gold, hitting jewellery stocks

PRIME Minister Narendra Modi has called on Indians to avoid buying gold for at least a year to preserve foreign-exchange reserves, a surprising appeal in a country where the metal plays a vital role in savings, weddings and religious festivals.

“For a year, be it any function, we shouldn’t buy gold jewellery,” Modi said on Sunday, as he also asked citizens to cut fuel use and unnecessary overseas travel. India spends a lot on importing gold into the country, and people should refrain from non-essential purchases, he said.

The unusual request underscores how the war in the Middle East and the resulting energy shortages are widening India’s trade deficit and weakening the rupee. Gold constitutes the largest share in India’s import bill after oil, and the country is the world’s second-largest importer of bullion.

The extent to which Indians will heed Modi’s request remains to be seen. The precious metal runs through nearly every aspect of economic and cultural life in the country. Many Indians favour it for savings, while it’s seen as auspicious to buy it for weddings and during festivals. 

Local jewellery maker stocks fell on Monday, though. Titan, India’s biggest jeweller, lost as much as 6.6 per cent in Mumbai. Senco Gold and Kalyan Jewellers India were down as much as 10.8 per cent and 9.5 per cent, respectively.

Indian banks have recently struggled to import gold due to administrative bottlenecks, with the disruptions likely supporting India’s trade balance in April. BLOOMBERG