On September 1st, Indian Prime Minister Narendra Modi called on the Indian public to avoid buying gold unless it is necessary, through his personal social media account. A similar call was made by Modi in May of last year.
"If there is no need, do not buy gold. The more we emphasize domestic products and self-reliance, the more I believe that when India marks its 100th anniversary of independence, we will present our young generation with a developed India," wrote Modi.
Local Indian media reported that while Modi made these remarks, the Indian government is considering lowering the tariffs on gold and silver imports. Previously, the increased tariffs failed to curb the inflow of gold and silver.
Gold is India’s largest import commodity after petroleum, and it is also a major source of trade deficit. In July, India’s trade deficit increased to nearly 32 billion US dollars, the highest level since January this year.
The Indian newspaper 'Economic Times' believes that Modi's actions are aimed at protecting India's foreign exchange reserves in the face of increasing global uncertainties. India's gold imports must be paid in foreign currencies, mainly the US dollar. This means that every surge in demand for gold will lead to an increase in the demand for US dollars in the foreign exchange market, as banks and importers need to purchase US dollars to pay their suppliers worldwide.
After Modi's speech, the stock prices of local jewelry manufacturers dropped. The stock price of Titan, India's largest jewelry company, fell by 1.12% to 5045.50 rupees, and the stock price of Kaliyan Jewelry Company fell by 4.50% to 587 rupees.
