Gold Imports by India Plunge 56% as Rally Deter Buyers

Gold imports by India, the world’s largest bullion buyer, slumped 56 percent in the second quarter after record prices discouraged jewelry buyers and investors, according to the World Gold Council.

Purchases plunged to 131 metric tons in the three months ended June 30 from 301 tons a year earlier, the London-based producer funded group said in a report today. Jewelry demand dropped 30 percent to 124.8 tons, while purchases of coins and bars for investment slid 51 percent to 56.5 tons, it said.

Bullion futures in India rallied to a record last quarter even as global prices declined 4.3 percent, as the local currency slumped to an all-time low against the dollar. Global gold demand fell 7.1 percent in the April-June period to 990 tons because of higher prices and concerns about economic growth, the council said.

“Slowing GDP growth, record high local gold prices caused by currency fluctuations, stubborn domestic inflation, high interest rates, and fears of a poor monsoon season, all contributed,” the council said. “However, there will be considerable latent demand for gold, particularly in light of the weak first half,” the council said.

The Indian rupee declined to a record of 57.3275 per dollar on June 22, making imports costlier. Jewelers held a strike in March and April to protest government taxes on imports, further trimming demand, the council said.

Bullion for immediate delivery was little changed at $1,604.55 an ounce at 8:55 a.m. in Mumbai. The October-delivery contract declined 0.2 percent to 30,005 rupees ($536) per 10 grams on the Multi Commodity Exchange of India Ltd. yesterday.

Weak Monsoon

Below-average monsoon rain this year has stoked concerns about rural jewelry demand, given people’s dependence on farming and the potential impact of a poor harvest on income levels, the council said.

The monsoon rains, which account for 70 percent of the country’s rainfall, were 15 percent below a 50-year average, the worst in three years, the India Meteorological Department said yesterday. Rural areas represent about 60 percent of gold buying in India, according to UBS AG.

Gold consumption in India fell 7 percent to 933.4 tons in 2011, while imports were a record 969 tons, according to the council.

“Demand should emerge during the main fourth-quarter wedding season and November’s Diwali festival, a key traditional gold buying occasion in the Hindu calendar,” the council said.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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