Drought hits gold, August imports plummet 90%

India’s gold import may have slumped by 90 per cent in August despite the advent of the festival season, as high prices prevented people from buying the precious metal, especially after drought triggered fears of dent in rural income.

“Gold imports in August will remain within 10 tonnes as prices are ruling high at over Rs 15,000 per 10 gm level,” Bombay Bullion Association Director Suresh Hundia said. Gold prices were ruling at Rs 14,600 per 10 gm in the beginning of the last month.

India imported 98 tonnes of gold in August 2008, highest in a month last year, as prices fell leading to an escalation in demand in the build-up to the previous festive season.

However, as the country is now facing a double whammy of drought in about half the region and soaring food prices, demand for gold remained subdued, as people preferred spending on basic necessities to buying jewellery, according to Hundia.

Poor rain this year have raised fears of a slump in farm output affecting rural income, as over 60 per cent of India’s population still depends on agriculture for livelihood.

Importantly, the import of gold this festival season (September-December) may not match the last year level of 146 tonnes if prices remain firm, Hundia said.

Gold was trading at Rs 15,050 per 10 gm for the October delivery on the country’s largest commodity exchange MCX yesterday.

The country’s gold import is estimated to have slowed down to about 69.4 tonnes from January to August this year, compared with 261 tonnes a year earlier.

Gold imports remained sluggish this calendar year with the purchase from overseas falling to 59.4 tonnes from January to July, compared with 163 tonnes a year before.

The import fell to a new low in January at just 1.8 tonnes, followed by zero purchase both in February and March due to a high prices, as investors took refuge in the safe haven status of the precious metal cutting down on dependence on stock markets.