Good crop to boost buying
MARKET REVIEW/DOMESTIC: GOLD
| Gold demand in India, the world's largest consumer where people buy the yellow metal both as an investment and adornment, had fallen over the past few months as prices hit a 15-year peak of $430.50 an ounce on January 6. |
| "We have already seen a pick up in demand at a price level of around $400 per ounce," said Girish Kumar Choksi, a bullion dealer in Ahmedabad. |
| Nayan Pansare of Inter Gold Ltd, a Bombay-based importer, said Indian buying should be good as prices had eased a bit from $417 an ounce to around $390 in the last 10 days. |
| Choksi said rural demand for jewellery was likely to be strong with farmers harvesting good oilseed, cotton and grains crops, after excellent weather. |
| Farmers in western India have nearly finished their cotton and groundnut harvests while wheat and mustard crops in northern India will be ready by the end of March. Nearly two-thirds of India's billion plus population depend on agriculture for a livelihood. |
| Jewellers and investors, who had held back purchases over the past few weeks because of a sudden rise in prices, have stepped up buying after gold prices fell below $400 an ounce. |
| Domestic prices follow global trends due to dependence on imports, with India buying an average 1.6 tonnes of gold a day to meet more than two-thirds of its annual needs of about 800 tonnes. |
| "Imports into Ahmedabad have risen to 600-700 kg per day from 250-300 kg when prices ruled above $400 per ounce," Choksi said. |
| Pansare said apart from harvests, demand for gold will also grow ahead of federal elections in April and May. |
| "We have seen lots of gold buying during previous elections," said Pansare. "Gold can be exchanged easily because it can be bought with cash and sold for cash." |
| Traders estimated that India will import about 60 to 70 tonnes of gold a month until May, compared with around 55 tonnes a month a year ago. |
| "People who sold their holdings at level of more than $400 are turning buyers now," said R.K. Das, general manager (forex), at Adani Exports Ltd. |
| Das said the Indian market was still very price-sensitive and demand should grow if the market stabilised at this level. "Retail jewellery demand is poised for a strong growth." |