Gold import in July had doubled to 90-95 tonnes from the 47 tonnes in June. July (and June) is normally a lean season for gold in India, the world’s largest consumer and this is the highest figure for July in five years. It was 40 tonnes in July 2014.
The rise was due to a sharp fall in prices, which spurred demand. Consumers went for early buying, ahead of the festival season which begins from end-August. Rural demand, too, starts only after these months, if rainfall if normal and there are signs of a good crop.
This time, prices started falling from the last 10 days of June and continued in July. Prices started falling from Rs 28,000 per 10g and went below Rs 25,000. Price-sensitive consumers came out to buy.
Sudheesh Nambiath, senior analyst at GFMS Thomson Reuters, said: “Demand from India has been very strong and since July 20, the NCDEX-polled domestic gold premium has averaged approximately at $2 (an oz), an indication of strong offtake despite increased supplies. The response at the jewellery show was overwhelming.” The reference is to the 32nd India International Jewellery Show here, an annual business-to-business exhibition, in early August.
In the past two days, gold prices have gone up almost Rs 1,000 per 10g, due to a lower rupee value and increase in international prices. China’s devaluation of their currency has turned gold positive. Says Nambiath, “The Indian currency is on a weak footing currently, thereby providing a floor for gold in rupees. And, as the gold price in rupees stabilises, consumers on the sidelines will return to the market, thereby lifting the physical demand.”
In July, the importing agencies reported a good flow of orders, with the higher premia only encouraging larger volumes held on a consignment basis. In the new Foreign Trade Policy, there are three private companies qualified as nominated agencies, thus being eligible to supply to the domestic market. They have been permitted by the Reserve Bank to also import gold on a consignment basis, not only against payment.