India gold imports may plunge to 100 tons in 2009

February 08, 2009

Commodity Online
MUMBAI: Gold imports to India, one of the largest consumers and importers of the yellow metal in the world, could collapse to the lowest in the decade if gold prices continue to rise in the coming months, bullion dealers said.

Buying of gold jewellery has fallen sharply in January leading to a slump in the yellow metal’s imports. According to the Bombay Bullion Association figures, gold imports dipped to 1.8 tons in January 2009 against the 18 tons in the same period last year. In 2008, India’s gold imports dipped by 45 per cent to touch 450 tons.

”There has been more than 90% plunge in gold imports in January. The trend is continuing for February also. If this lowest level of gold intake continues in India, 2009 will be the worst year in this decade as far as gold imports are concerned,” Ashish Roy, a bullion dealer in Zaveri Bazaar, Bombay’s bustling gold market, told Commodity Online.

In the last eight years from 2000, gold imports to India every year have been between 400-800 tons. But Roy says he fears that gold imports this year could collapse to 100 tons, if the current trend continues. “It will not be a surprise if gold imports fall to an all-time low of 100 tons or below in 2009,” he said.

High prices, global economic meltdown and financial crunch among investors and bullion dealers led to low demand for gold in India, where yellow metal is considered the best safe haven investment and people buy gold for weddings and other ceremonies.

According to Suresh Hundia, President, Bombay Bullion Association, gold sales and demand have dropped to negligible levels because of high prices. “Gold and jewellery sector is reeling under a crisis because of high prices and retrenchments across sectors,” he said. Gold prices which in December was from Rs 13,505 for10 grams moved to an all-time high of Rs 14,350 per ten grams last week. Analysts have predicted that gold prices could zoom to Rs 16,000 per ten grams by April this year.

Inspite of the fall in demand, gold prices have moved up as investors found heaven in the yellow metal on fear of deflation. But even though investment in gold looks attractive, many investors have been struggling for survival after they lost money in commodities and equity markets.

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Harish Galipalli, Head of Research, Karvy Commodities, says gold prices could zoom to higher levels because of the dollar-euro movements on weak economic fundamentals. “Gold prices are only going to up in future,” he said.

The World Gold Council, however, has predicted there will be a modest gain in gold purchases in India during the summer wedding season and the Hindu religious festival of Akshaya Tritiya. “There will be a modest growth of 10-15 per cent in the Indian domestic jewellery business,” said K Shivram, Vice-President, World Gold Council.

Shivram says gold sales will pick in April-May-June after the dull season of December and January. One of the main reasons that is cited for the plunging gold imports is that Indian banks have a lot of carryover gold stocks from December and also November resulting in lower imports. Higher prices have also been the culprit for decreasing gold imports.

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