Capital Gold Group Report: India Gold Imports May Recover as Price Lures Buyers
Aug. 12 (Bloomberg) -- India, the world's biggest buyer of bullion, may increase imports for the first time in 11 months as the lowest price this year lures buyers.
Purchases may rise as jewelers rebuild inventories before the festival season starts later this month, said Suresh Hundia, president of the Bombay Bullion Association, Ltd. Imports fell by more than half in the 10 months ended July 31 from a year ago as record prices cooled jewelry demand, he said.
``Demand has been so much in the last couple of days that banks and other importers have run out of supplies,'' said Hundia in a phone interview in Mumbai, where the grouping of 230 trading companies is based. ``If the price keeps falling, there's no reason why people won't continue to buy.''
A recovery in Indian demand may help stem a drop in gold, which led other precious metals including platinum and silver into a bear market after falling 22 percent from its March 17 peak of $1,032.70 an ounce. Increased consumption may benefit retailers including Rajesh Exports Ltd., the nation's biggest jewelry producer, whose stock has plummeted 65 percent this year as record prices cooled sales.
Imports by the South Asian nation in the three months ended July likely fell by as much as 35 percent from a year ago after a 50 percent slump in the previous three months, said Ajay Mitra, managing director of the producer-funded World Gold Council.
Jewelry demand fell 21 percent to 445.4 tons in the quarter ended June from a year earlier, the lowest quarterly consumption since 1993, the Press Trust of India said last month, citing data from the council.
Retail Buyers
That trend may reverse as consumers advance their festival and marriage gold purchases to benefit from lower prices. Demand traditionally picks up in the second half of the year, spurred by the wedding season and Diwali, the Festival of Light.
``Buyers, who have been pushing back purchases for too long, will relish current prices,'' Mitra said. ``Retail buyers, with festivals around the corner, will lap up gold at these prices.''
India imported 722 tons of bullion in 2007, less than the 1,000 tons forecast by the Council at the beginning of the year.
Gold for immediate delivery declined as much as 2.6 percent to $802.34 an ounce and traded at $815.34 at 9:23 p.m. in Mumbai. Platinum lost as much as 3.7 percent and silver 4.5 percent. The dollar traded near a 5 1/2-month high against the euro today and close to a seven-month high against the yen.
Bullion may rebound after the summer months in the Northern hemisphere because of demand for jewelry, Frederic Lasserre and Stephanie Aymes, analysts at Societe Generale, wrote in an e- mailed report today.
`Strong Revival'
``There is evidence of a strong revival in physical interest in the Middle East and Indian jewelers are restocking,'' Paris- based Lasserre and Aymes in London, said. ``This is an important early sign that gold, which is now relatively free from weak `professional' holders, may be preparing for a bounce as we approach the autumn.''
Commodities, as measured by the Standard & Poor's GSCI index, have fallen 21 percent from a July 3 record, slipping into a bear market on signs a U.S. economic slump will extend into 2009. Gold has tumbled 22 percent from its record, while platinum and silver are down 36 percent and 33 percent from their peaks.
A bigger harvest, which leaves more money in the hands of India's 235 million farmers, may also boost demand for bullion, said Daman Prakash, director of MNC Bullion, which sells to jewelers in the southern states of Karnataka and Tamil Nadu.
``One cannot forget that agriculture is the backbone of the
economy, so if there's good harvest we're going to see a rise in
purchases,'' he said.
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