Gold demand seen picking up from Aug: WGC

Gold demand seen picking up from Aug: WGC
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First Published: Fri, Jul 31 2009. 04 13 PM IST
Mumbai: India’s gold demand may pick up from August as consumers flush with cash and pent up demand are seen boosting sales, potentially salvaging an almost 50% sales drop, a World Gold Council (WGC) official said.
Prices are seen stabilising around Rs14,000 per 10 grams in the upcoming festive season and this could lure consumers, Ajay Mitra, managing director, Indian Subcontinent, WGC, said.
“Our outlook is that it (demand) should be good,” Mitra said in an interview.
The May general elections, which pumped an estimated Rs10,000 crore into the economy, and a wage hike to government employees, would provide ample cash to many consumers, Mitra added.
India consumed 17.7 tonnes of the yellow metal in the first quarter of this year, down 83% from the quarter a year ago, WGC’s data shows. The Bombay Bullion Association’s data showed a more than-50% sales drop in January-June period.
Mitra said prices, even though higher on year, have been stable above Rs14,000, since April, which could encourage consumers to spend.
“I think this year 14,000 is forming a base...Indian consumers get used to a floor price level when they see it at least for 6 months,” said Mitra.
India’s gold demand is expected to pick-up from August onwards, when festivals and weddings spur purchases, he added.
The below normal monsoon is unlikely to be a deterrent, Mitra added. “Unless it is a drought-like situation gold sales won’t be hit.”
Second-quarter sales numbers expected by mid-August are likely to show an improvement over the previous quarter.
“The second quarter trends are much better than the first... jewellery demand in second quarter would be much, much better than other core markets,” said Mitra.
During the first quarter, China overtook India on gold consumption by a gap of 96 tonnes, but Mitra said it was a seasonal impact of Chinese new year.
“Indication is that (value-added) gold exports are substantially less than Q1,” Mitra said.
India exported 17 tonnes of gold in the first quarter as traders took advantage of disparity in prices.
As local prices fell below global rates, an arbitrage window had opened for traders stuck with high stocks. Domestic market was awash with gold as scrap sales surged as much as four-fold.
At 3:37 pm, gold was at Rs14,689 per 10 grams, down 8% from its all-time high of Rs16,040 struck on 20 February as investors stuck to gold’s safe haven appeal amid a global downturn.
Bridging Gaps
The WGC plans to promote gold among customers in northern India, who fall behind their southern peers in consumption.
“We have to reconnect north to gold. It has the highest per capita income and highest number of people,” said Mitra.
South India accounts for 40% of the total gold demand, and north contributes around 20%, he said.
WGC also plans to raise the number of post offices through which consumers can buy gold coins, to 500 branches by October this year from 250 currently.
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First Published: Fri, Jul 31 2009. 04 13 PM IST