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Gold imports may fall 10% due to weak monsoon |
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KOLKATA: India's gold imports are likely to fall 10% this year due to a decline in demand following a weak monsoon and offloading of the precious metal by investors to generate liquidity in the backdrop of a crash in equity market.
"Deficit rainfall will definitely hurt the gold demand in rural India as certain crops may get damaged. On a conservative basis, we can say that imports will be down 10% as demand will be less," said Ketan Shroff, spokesperson of the India Bullion and Jewellers Association. Rural India accounts for 60% of the gold consumed in the country.
The India Meteorological Department has forecast a deficit of 12% in monsoon rainfall this year.
Saurabh Gadgil, MD of Punebased PN Gadgil Jewellers, said other reason for the fall in demand is the sudden crash in the equity market.
"The ferocity of the market crash, which began in the third week of August, has badly damaged the investor sentiment. But this is more of an urban phenomenon, which has forced people to sell off a portion of their gold holdings to create some liquidity in hand," he said.
However, sales may pick up after Ganesh Chaturthi, which falls on September 17, said Gadgil.
In 2014, gold demand in India was about 875 tonnes as the 80:20 rule, which was removed in November, affected gold imports.
India depends entirely on imports to meet its appetite for gold. This year, World Gold Council has pegged the demand at 900- 1,000 tonnes.
Jitendra Jain of Jugraj Kantilal & Co, a leading scrap gold dealer in Mumbai, attributed the sell-off to the hike in gold prices rather than a crash in equity markets. "The volatility in the stock market may be one of the reasons. But I feel that the price hike in gold due to a weak rupee has played a major role for investors and households to liquidate a portion of their gold.
In the past three weeks, we have seen people offloading gold to some extent. We are receiving two-three kg of gold jewellery on average," Jain said.
Gold prices, which had dropped below Rs 25,000 per 10 gm in early August, have climbed gradually as rupee weakened against the US dollar. On Wednesday, gold prices in India hovered around Rs 26,900 per 10 gm. "At this price level, it is lucrative for investors to offload gold to recover their losses in the equity market," said Shroff.
Consumer demand in India fell 25% to 154 tonnes in quarter to June. The total decline in the first half of 2015 was 7% to 346.2 tonnes, compared to 372 tonnes a year ago. Somasundaram PR, managing director of World Gold Council India, however expressed optimism that demand might pick up in the second half of 2015.
"The upcoming wedding and festival season in India suggests healthy prospects for the jewellery market. We had seen a positive uptick in demand after the prices dropped in late July and early August. With the prices firming up, we may expect investing community taking interest in gold going ahead," said Somasundaram.
Source : economictimes.indiatimes.com
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