India Gold, Silver Demand Steady

October 8, 2013 at 09:27

truthing

Gold trade does not see a significant surge in rural demand even though monsoon has been better this kharif season, raising expectation of a better crop. High price of the yellow metal coupled with rising inflationary pressures are the negative factors that may have an impact on the rural demand during this festive season.

Rural India generally contributes 60%-70% of country’s total gold consumption which is likely to be around 750 tonne this year. The trade feels that demand for silver will rise this year as the rural belles generally like to wear heavy jewellery which they will not be able to make out of gold.

Gold price in India is currently hovering around Rs 29,700 – Rs 30,000 per 10 gm. Talking to ET, Haresh Soni, chairman, All India Gems and Jewellery Trade Federation said: “Monsoon has been good this year.

Going by the past experience, demand from rural sector should increase this year. But the sentiment is very weak and there is liquidity crunch in the market. Moreover, the inflationary pressure has also worsened the situation. Therefore, rural India will spend for gold only after meeting their essential needs. If sentiment improves then we expect good business from rural India during the festive season”.

Bullion dealers say that rural demand will come if price falls to Rs 25,000 to Rs 26,000 per 10 gm. But Soni does not think that prices will drop to that level during this year’s festive season. “It will be range bound and hover around Rs 28,500 to Rs 30,500 per 10 gm,” he said.

Gold prices are still ruling high as hardly any imports is taking place to meet the domestic demand. In the past week, about 1 tonne gold consignment has been cleared by the customs authority. This gold was, however, meant for exports and therefore no gold has yet entered the market for meeting domestic demand.

Bipin Jain, vice-president, Bombay Bullion Association said: “Premium on gold is again on the rise which is making gold costlier in the domestic market. Premium has surged to $50 per ounce as slowly demand is coming in to the market”.

The trader also added that though monsoon has been good this year, excessive rain has also affected crops in certain states like Madhya Pradesh and Maharashtra. “This may dampen the rural demand,” bullion dealers said.

Points out Satish Chand Singhvi, president, Delhi Jewellers Association: “The silver demand will be on the higher side this festive season in rural India. Rural women prefer heavy jewellery to wear during festivities. They may invest some funds in gold for creating an asset.” Silver at present is hovering around Rs 50,000 per kg