Gold demand plunges, imports halve

Gold demand fell 20% and imports more than halved in the second quarter, or April-June period, as record high prices and gloomy macroeconomic situation kept buyers and investors away.

Traders and jewellers are now pinning hopes on the festive season that started this month, but it has so far failed to revive demand.

Considering the economic slowdown, deficit monsoon and a shorter wedding season, the picture doesn’t look rosy for the rest of the year, experts said.

Demand for the yellow metal fell toRs50,773 crore in the second quarter as against Rs64,000 crore in the corresponding period last year, according to a World Gold Council (WGC) report.

Jewellery demand also declined 10% in April-June to Rs34, 950 crore as compared to Rs39,000 crore a year ago, while investment demand dropped 51% to 56.5 tonne from 115 tonne in the previous year. Ajay Mitra, MD, India & Middle East, WGC, said, “Gold demand for the quarter has been subdued primarily due to the poor macroeconomic conditions. The deficit monsoon and gloomy global economic outlook are adding to the worries.”

Rainfall being 13% below average in July and the meteorological department predicting drought-like situation also hasn’t helped matters.

“Because of the weak monsoon, a drop in rural demand is being witnessed. The fact that rural population contributes to over 50% of the total gold demand is going to make the matters worse,” said Pithviraj Kothari, president of the Bombay Bullion Association.

Prices, too, remained at a staggering high level of Rs29,000-30,000 per ten gram in June as against Rs21,000 in the corresponding period last year, keeping retail investors away.

While in dollar terms, the average gold price increased by only 7% during the second quarter to $1,609 per ounce, the weakening rupee pushed the price much high in local currency terms.

“This year the demand has been extremely poor. Consumer sentiment is affected and the prices are hovering around the record levels. As a result people are waiting for a correction in price before they invest in gold,” said Hasmukh Bafna, a Mumbai-based jeweller.

A shorter wedding season also led to subdued demand. This year the auspicious dates for marriage (muhurat period) are 58 days, or around two months less than the previous year, which has hit demand further.

“The dip in demand for marriage jewellery is evident as there are fewer auspicious dates, said Mitra of WGC.

Gold imports dropped 56% to 301 tonne in the second quarter from 131 tonne in the same period last year, according to the WGC report.

“There is a huge inventory pile-up and as a result imports are significantly low. In the past six months, imports are down by 40%,” said Kothari.

Jewellers said even those who are buying jewellery are doing so by selling their old ornaments and recycling gold.

“Though the consumer sentiment has been subdued for a while, we are hoping that it will improve and demand will pick up by the end of this month or early September,” said Gems & Jewellery Export Promotion Council.

But the analysts are not very hopeful of a turnaround.

“Although gold demand has been poor for most of the year, consumption did pick up last month. High prices in local currency terms and reduced farm sector income do not bode well for near-term bullion demand,” said James Steel, an HSBC analyst, in a commodity research note.

Source : dnaindia.com