Gold imports by India, the world’s largest buyer, are set to climb for the first time in six quarters as a decline in domestic bullion prices stokes jewelry and investment demand ahead of major festivals.
Overseas purchases may jump to as much as 200 metric tons this quarter, said Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade Federation. That compares with the 157 tons in the fourth quarter of 2011, according to World Gold Council data. Purchases in the quarter ended September probably fell to as low as 170 tons from 205 tons a year earlier, Bamalwa said. The council is yet to release data for the third quarter.
A rebound in Indian imports may help sustain an 11 percent rally in global prices, headed for a 12th consecutive year of gains. Bullion in India has fallen about 3 percent since climbing to a record last month after the rupee posted the biggest monthly gain against the dollar since January.
“The appreciation in the rupee has caused the gold price to correct from the record levels and this correction is seen as an opportunity by many to get into gold,” said Chirag Mehta, a fund manager at Quantum Asset Management Co. “With the festival season and marriage season starting now, demand will gain further momentum.”
Spot gold fell 0.5 percent to $1,732.60 an ounce at 2:03 p.m. in Mumbai. The contract for delivery in December was little changed at 31,380 rupees ($582) per 10 grams on the Multi Commodity Exchange of India Ltd. today. The rupee rallied 5.1 percent in September, data compiled by Bloomberg show.
Demand has picked up in the last 10 to 15 days and buying may be better this festival season than a year earlier, Bamalwa said. “In the last three to four months, there was practically no demand for gold because of the high prices. There is a lot of latent demand, and we expect this festive season to be better.”
Imports plunged 42 percent to 340 tons in the first half of this year as an increase in import tax and a strike by jewelers hurt demand, according to the World Gold Council. Purchases may decline for the first time in three years to 600 tons this year from a record of 969 tons in 2011, Bamalwa said.
“India should be a better buyer over the next two weeks from a seasonal perspective, but this remains highly contingent on the behavior of the rupee gold price,” Edel Tully, an analyst at UBS AG in London, said in a report yesterday. “Indian imports are already 40 percent less than they were last year, and we understand inventories are generally light. Therefore, if the rupee behaves, fresh demand will also prompt restocking.”
Buying gold is considered auspicious during the religious festivals in India. The festival season starts this year with Dussehra on Oct. 24 and ends in November with Diwali, which is followed by the traditional wedding season.