Indian banks hold lots of carryover Gold stocks

January 30, 2009

Commodity Online
MUMBAI: Why is it that gold imports to India, the world's biggest importer and consumer of the yellow metal, are falling drastically?

The January figures are dismal and according to the Bombay Bullion Association India’s Gold imports plunged more than 90 percent to just 1.2 tonnes in January 2009, from 18 tonnes at the same month last year, due to high prices and ample stocks.

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.

India's local demand for gold has altogether muted as prices have jumped above Rs 14,000 per ounce and buyers are keeping their distance from the markets. Sellers are in plenty but buyers are not to be seen anywhere.

Indian Rupee fell to the lowest in this week at 48.97 against the dollar riding on news that international funds sold more Indian equities than they bought, pulling the benchmark Bombay Stock Exchange lower by 0.2 percent. The equity market remains jittery and continues to affect the underlying currency market.

The more the stimulus, the more will be the concern that is what has been proven till now because after the new Obama stimulus was passed, Gold sales increased tremendously. The same unprecedented steps that Central Bankers are taking to rescue the banking system are driving investors to Gold, the commodity investors buy when they lose confidence in financial assets.

On Friday, gold opened in New York at $880.00/882.00 and climbed higher but not for long as it slipped into lows later in the afternoon. As the investors began dumping equities, Gold rose and the session progressed causing Gold to close at a high of $905.50/907.00 an ounce.

Silver also opened in New York at $11.80/11.85 an ounce and followed Gold higher on the back of good metal buying. As dealers took profit, the metal dipped to a low on light trading. Silver later gathered steam and spent the rest of the afternoon climbing higher as the equity markets lost. Silver did not last long on its high stand and came marginally lower but closing much higher than the open price at $12.14/12.19 an ounce.

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