-- Posted Thursday, 16 February 2012 | | Disqus
Gold imports to India, slumped 44% to 157 tonnes in the December quarter on a record high prices but total imports in 2011 edged up 1.1% on higher purchases in the first half of the year, the World Gold Council (WGC) said.
India imported 969 tonnes of gold in 2011 against 958 tonnes a year ago. India's jewelry demand fell 44 percent to 103 tonnes in the quarter, while investment demand was down 38 percent to 70 tonnes, the WGC said.
Our view
There is nothing to worry over the slump in Indian gold demand. This will rise in the January to March 2012 quarter, once gold prices stabilize. A weaker rupee prevented gold prices from falling in the October to December 2011 quarter and also increased gold price volatility. Investment in gold does not have any tax benefits. Gold investment demand could fall further on profit taking before the fiscal year which closes on 31st March as investors switch to tax savings schemes. However the recent consolidation in gold prices between Rs.27000 (per ten grams) and Rs.29000 (per ten grams) should result in more jewelry demand. Jewelry demand should rise more than gold investment demand. Should the Indian rupee appreciate against the US dollar as the year progresses, Indian gold demand will rise in a big way.
There are low income groups and middle income groups who want to buy gold. These are the groups who are praying that Indian gold prices fall. For Indian gold demand to rise in a big way in 2012, either prices should near Rs.25000 (per ten grams) or consolidate in the Rs.27500-Rs28500 range. Any sharp short term zoom in gold prices to Rs.30000-Rs.31000 will result in further fall in jewelry demand and a rise in investment demand.
Please note: I am more concerned over the slump in jewelry demand and every day closure of jewelry shops in some parts of India and resultant unemployment created. The jewelry sector is one sector which needs government support in the upcoming budget. Big gold brands and retail chains are benefitting as they have adapted themselves while small jewelry shops which unorganized sector do have the means and/or guidance to adapt to rising gold and diamond prices. These small shops should be given support either through the world gold council or some government agency.
(All gold prices above are in Rs/ten grams)
Disclaimer: Any opinions as to the commentary, market information, and future direction of prices of specific currencies, metals and commodities reflect the views of the individual analyst, In no event shall Insignia Consultants or its employees have any liability for any losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided in this material; or in any delays, inaccuracies, errors in, or omissions of Information. Nothing in this article is, or should be construed as, investment advice. Prepared By Chintan Karnani.
-- Posted Thursday, 16 February 2012 | Digg This Article
| Source: GoldSeek.com
