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.
Overseas purchases plunged to 131 metric tons in the three months ended June 30 from 301 tons a year earlier, the producer funded group said in a report today. Demand for jewelry dropped 30 percent to 124.8 tons, while for coins and bars for investment it 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.
“With the economy slowing down, consumers tend to hold on to cash,” Ajay Mitra, managing director, India and the Middle East at the council, told reporters in Mumbai. “The worst is over and there is going to be a recovery in demand because of the festive season,” he said.
Asia’s third-largest economy expanded 6.5 percent in the year ended March 31, the slowest pace since 2003, and the 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 $1,603.88 an ounce at 4 p.m. in Mumbai. The October-delivery contract climbed 0.2 percent to 30,064 rupees ($538) per 10 grams on the Multi Commodity Exchange of India Ltd.
Gold demand in India may climb starting next month with the beginning of major festivals, council’s Mitra said. Consumption may total 688 tons to 700 tons this year, compared with 933.4 tons in 2011, he said.
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.