Gold imports slump 80%

Purchases increasingly need-based and budget-constrained.

Gold imports have slumped over 80 per cent year on year as record prices have scared buyers in India and left them to helplessly watch the blistering rally that shows no signs of abating.

The latest World Gold Council (WGC) report showed that gold imports by India declined 72 per cent to around 24 tonnes in January this year following a 67 per cent decline in the quarter ending December 2007.

Analysts said February showed a further fall by around 80 per cent as rising prices stagnated domestic demand. India imported just 10.2 tonnes of gold in February, said an analyst.

With prices showing no signs of cooling, March is not expected to be any better as physical buyers are not comfortable buying the yellow metal at such high prices. 
 

DULL TRADE: GLOBAL DEMAND TRENDS
(tonnes)	Q4 2006			Q4 2007			% change Q4 2007 vs Q4 2006
	Jewellery	Net retail Investment	Total	Jewellery	Net retail Investment	Total	Jewellery	Net retail Investment	Total
India	165.4	64.7	230.1	54	29.9	83.9	-67	-54	-64
Greater China	73.5	6.4	79.9	84.5	9.8	94.3	15	53	18
China	65.5	5	70.5	77.3	7.5	84.8	18	50	20
Hong Kong	3.7	0.2	3.9	3.8	0.2	4	4	10	4
USA	126.4	3.7	130.1	104.6	6.1	110.7	-17	65	-15
Source: World Gold Council

Analysts said even the marriage season, which generally boosts buying as parents prefer to give gold to brides for financial security, has failed to lift purchases as buyers are not comfortable with heightened price volatility.

Yesterday Indian spot gold prices opened at a record high of Rs 13,495 per 10 gram in Mumbai. The international spot gold also increased by 3 per cent, touching $1,030. Such volatility is also leading to a change in gold consumption.

An analyst said gold purchases are increasingly becoming need-based and constrained by shrinking budgets.

"The demand for polished and recycled jewellery is increasing, thus curtailing a fresh demand for physical gold."

The rally in gold prices has sent jitters across Asia, with jewellers complaining that high prices are turning consumers away.

India's largest gold importer, MMTC Ltd, had earlier expected to end the year with an import of about 100 tonnes of gold in the financial year ended March 2008, down from about 140 tonnes the year before, due to sluggish demand.

Jewellery accounts for almost 80 per cent of gold consumption with bars and coins comprising the balance. Industial gold consumption forms a mere 3 per cent of total consumption.

Last year India imported 773.6 tonnes of gold, which fulfils almost the entire gold consumption of the nation. Mumbai-based bullion analyst B N Vaidya said, "Gold demand is very poor with almost an 80 per cent dip in imports. A large chunk of the imports are happening for re-exports while some of the traders are importing on consignment basis."

This could have major implications for jewellery retail. Rajesh Mehta, chairman of Rajesh Exports, said customers seem to be postponing or reducing purchases due to the shooting gold prices. The company has taken a strategic move to go slow on retail expansion till demand picks up after prices stabilise a little."

The Bangalore-based jewellery firm had earlier planned to open 100 stores of Shubh Jewellers, a jewellery retail chain. The WGC, though, is expecting consumption demand to pick up in the next quarter.