India getting back into gold buying mode as prices fall

apollochil

Initial estimates suggest that Indian gold imports in January were the strongest for three months and sharply higher than a year ago.

Author: Lawrence Williams
Posted:  Wednesday , 10 Feb 2010

LONDON -

Gold News

RENEWED INTEREST

India getting back into gold buying mode as prices fall

Initial estimates suggest that Indian gold imports in January were the strongest for three months and sharply higher than a year ago.

Lawrence Williams

LONDON

Last year was pretty disastrous one in terms of Indian gold purchases, but already there has been quite a pick-up this year and there are indications, although this is a very early stage, that the country may be moving back to the global No.1 gold purchasing nation, a position which was usurped by China in 2009.

With gold trading below $1,100 an ounce, dealers have been seeing renewed interest even though the rupee has been weak, increasing the price paid in local terms.  According to a Reuters report, India imported 35-40 tonnes of gold from January 1-27, up from 9.8 tonnes in the whole of the same month last year, the head of a trade body and bank dealers said.  Other reports suggest the figure may have been much higher - gold analyst Jeff Nichols reckons as much as 60 tonnes (see Despite recent setback gold fundamentals suggests $1,500 price this year) which would put the gold obsessed nation very comfort

According to preliminary data released by the Indian Bullion Market Association (IBMA), the trade body representing Indian gold jewellers and importers, for example, total gold imports during January rose to 37 tonnes - a three-month high.  This compares with 27 tonnes in December and 30 tonnes in November last year. In October, however, gold's arrival into the country was recorded at 48 tonnes on occasional demand from retail jewellers, but this was at the heart of the festival season when gold purchases tend to run at a higher level anyway.

While there's little doubt that the Indian market can be quite price sensitive, and the run up in prices last year and at end 2008, coupled with economic uncertainty, was the prime reason the Indian gold market was incredibly subdued.  However the recent pick-up suggests that the market is adapting to $1,000 + gold - as it has to other price increases in the past - and with some banks reporting good advanced orders if gold should drop to $1,050, to an extent this may help underpin the market at or around current levels.  The Indian Central Bank purchase of 200 tonnes of IMF gold at around $1,045 an ounce may have given the populace a lead in accepting the higher prices.

This does not tend to be a strong time of year for Indian gold purchases, although it could be for China with the Chinese New Year coming in on February 14th, but the next Indian wedding season starts up in April and this could give a further boost to purchases, particularly if the gold price stays where it is, or lower.

Anita

thanks!

coexist