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India’s Gold Demand May Revive on Normal Monsoon
India’s gold demand could revive from a prolonged slump if predictions of normal monsoon rains over the country are realized, a top industry body executive said Tuesday.
“If we have good monsoon rains, then gold demand could be anywhere between 750 and 800 metric tons this year,” Bombay Bullion Association President Prithviraj Kothari said.
The country imports nearly all of its gold. It was the world’s top gold consumer until the first quarter of this year, when it was overtaken by China. Any revival in demand from India in the coming months could help stabilize prices, which hit a record 1,921 U.S. dollars a troy ounce last September but have fallen in recent weeks due to concerns over the euro-zone crisis.
A delay of five to six days in the progress of monsoon rains isn’t of concern, as it isn’t likely to have a substantial impact on crops, Mr. Kothari said. Rural buying accounts for most gold purchases in the country.
“So far, so good,” he said, adding that the June-September seasonal rains had already advanced to most of the major gold-buying regions.
Last Friday, the state-run India Meteorological Department said monsoon rains would be normal this year but noted that the amount of rainfall is expected to be slightly less than initially forecast.
If the monsoon rains were to fall below the normal level, gold demand would drop to no more than 500-550 tons, Mr. Kothari said.
India’s gold purchases in the first half of this year had likely halved to around 250 tons from the same period last year, he said, hit by a combination of high inflation and a doubling of the import tax on gold to 4% in March.
India imported 969 tons of gold in 2011, according to the World Gold Council.
Spot gold prices in India are quoted around 30,500 rupees per 10 grams.
Mr. Kothari said gold buying in India could revive as early as next month if local prices come down to a range between 28,500 rupees and 29,000 rupees/10 grams.
“For the past two to three months, there has been virtually no gold buying in India. But if international prices were to retreat and the dollar-rupee holds at current levels, then I expect demand to pick up again,” said Krishna Kumar Nathani, managing director of consultancy Indiabullion.com.
The rupee has lost more than 20% against the dollar since August, making it one of the worst-performing currencies in Asia. It’s currently quoted around 57 rupees to a dollar