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India's gold imports are set to plunge by more than 90% in March from the previous month to hit their lowest level since the COVID pandemic as banks cut imports after record-high prices hit demand, a government official and two bank dealers told Reuters. Lower imports by India, the world's second biggest consumer of the precious metal, could limit a rally in global prices that hit a record high earlier this month on expectations that the Federal Reserve will cut interest rates this year. The drop in imports could also help India narrow its trade deficit and support the rupee. India's gold imports are likely to fall to 10 to 11 metric tons in March from 110 metric tons in February, said a government official, who declined to be named as he was not authorised to talk to the media. Gold imports in March 2024 are expected to be the lowest since the COVID pandemic, when air traffic restrictions limited imports and lockdowns led to the closure of jewellery shops. "A negligible quantity of gold is being cleared from customs this month after paying duty. There has been a sharp drop in gold imports compared to last month," the government official said. Two Mumbai-based bullion dealers from two leading gold-importing banks said they imported very little gold in March due to weak demand.

"Jewellers weren't buying even with a discount exceeding $35 per ounce. No reason to import the metal at a record high price and wait for demand," one of the bullion dealers said.

In India, domestic prices rose to a record 66,943 rupees per 10 grams earlier this month. This prompted dealers to offer discounts of about $38 an ounce over official domestic prices, including 15% import tax and 3% sales levies, the highest since March 2023. Gold demand usually stays strong in March as jewellers stock up for the Indian wedding season which is already in full swing and where gold is an intrinsic part. Also, customers are exchanging old jewellery for new because of the high prices, so jewellers have stopped buying gold from banks, the dealer said. Refiners have almost stopped imports of gold dore, a semi-pure alloy, because of their inability to offer steep discounts, said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the eastern city of Kolkata. India's duty on gold dore imports is 0.65% lower than the import tax on refined gold, but the market discount was more than 1%, making refining unviable, Ajmera said.