India’s tariffs on gold working: February imports to be lowest since 2013

India's gold imports are expected to drop to 25 tonnes in February, the lowest level since September 2013, as stronger metal prices and a recent import tax hike are keeping buyers away.

According to estimates from five industry participants, compiled by Reuters, banks and traders have scaled down imports and are offering steep discounts to clear inventory.

Discounts in India have hit a record high, while prices in China have also turned cheaper relative to the global benchmark, in a sign of waning demand.

Earlier this month, New Delhi increased the import tariff value on gold and silver in a fresh attempt to curb costly imports and stop precious metals from being used to hide billions of dollars of undeclared "black money".

The move seems to have worked, but at a cost: a drop in demand from the world's second-largest gold consumer could dent the ongoing rally in global prices for the precious metal. However, it would help India’s ongoing attempt to curb gold imports that cost the country $36 billion in 2015.

Indian banks and traders have scaled down imports and are offering steep discounts to clear inventory.

Gold prices have climbed from a little over $1,000 an ounce in late December to above $1,200 last week, through a period when every single major stock index has fallen.

That's part of a widespread flight to safety that has seen investors dump anything perceived as risky — stocks, oil and some currencies — and put their money into investments that are perceived to be safer.

But the metal has given back some of those gains as markets have stabilized. According to HSBC's analyst James Steel, the recent decline in gold prices doesn't mean the rally is over. He told Reuters Tuesday that demand for bullion exchange traded funds and possible weakening of the dollar are likely to support the metal.

Gold for April delivery on the Comex division of the New York Mercantile Exchange was last up $10.10 at $1,220.20 an ounce. A day earlier, gold prices sank $20.70, or 1.68%, as the metal's safe-haven appeal was dented amid a recovery in oil prices and global equity markets.