India’s gold imports in July plunged 55% from a year ago to the lowest level in three years as a rally in local prices to a record high and a hike in import taxes curtailed demand, a government source said on Monday.

Lower purchases by the world’s second biggest consumer could cap gains in global prices that jumped to the highest level in over 6-years on Monday, but help the south Asian country in bringing down the trade deficit and supporting rupee.

India imported 39.66 tonnes of gold in July, down from 88.16 tonnes a year ago, the source said, who was not allowed to speak to the media. In value terms, the country’s imports in the month fell 42% to $1.71 billion, he said.

Local gold prices jumped to record high last month tracking gains in overseas market and as New Delhi raised import taxes on the precious metal to 12.5% from 10% earlier.

The surprise hike in the import tax and price rise badly affected demand last month, said Mukesh Kothari, director at dealer RiddiSiddhi Bullions in Mumbai.

“Even in August, imports would be much lower than last year. Demand is not improving,” he said.

On Monday, local gold futures rose more than 2% to hit an all-time high of 37,149 rupees ($524.97) per 10 grams, taking their gains to more than 17% in 2019.

“As retail demand has dried up, jewellers are placing import orders with banks,” said a Mumbai-based dealer with a bullion importing bank.

India’s gold demand is likely to soften in the September quarter as record high local prices curtails buying, the World Gold Council said last week.

On Monday, dealers were offering a discount of up to $36 an ounce over official domestic prices, the highest since August 2016. The domestic price includes a 12.5% import tax and 3% sales tax.

Scrap supplies have been increasing as the price rise has been prompting many people to sell their old ornaments, said a bullion dealer based in southern city of Chennai, adding “Old supplies are further reducing import requirements.”