India’s gold demand could reach a record 1,000 tonnes this year as consumers buy for the festival and wedding season in the second half, the World Gold Council said, which may scuttle the country’s efforts to curb its imports and a trade deficit. Demand from China, which is on course to challenge India’s position as the top gold consumer this year, could also soar to a record 1,000 tonnes in 2013, the WGC said. 

 

Strong physical buying from the world’s biggest consumers, who account for nearly 60 per cent of global demand, will help prop up prices of the metal that have shed about 20 per cent this year after 12 consecutive annual gains. Consumer demand has however not been enough so far to compensate for a sharp drop in investor appetite this year, the WGC said in its quarterly report on Thursday.  India, which wants to keep imports below 850 tonnes in 2013, has raised import taxes three times in eight months. On Wednesday, it banned overseas purchases of gold bars and coins to rein in dollar spending. 

 

But the resilience in Indian demand has offset government efforts to curb imports, which revived in July after dropping in June. According to WGC, India’s consumption of gold rose to 310 tonnes in the second quarter ended June, highest in the last 10 years, despite government curbs to restrict imports to rein in burgeoning current account deficit. Much of the demand was met by stocks that had been built up to healthy levels following the April price drop. Imports more than doubled to 338 tonnes in April-June of this calendar year, it said. Gold consumption stood at 181.1 tonnes in the same quarter last year.

 

“We’ve seen that demand is robust,” Somasundaram PR, WGC’s India managing director, told Reuters. “Once the monsoon is over, rural incomes will rise and that will have its own impact on demand.” 

 

“There are also a lot more marriage and festival dates in October and November in the fourth quarter,” said Somasundaram, who estimated full-year demand between 900 tonnes to 1,000 tonnes for both India and China. Hitting the upper end of that range would be record annual consumption for both the countries, he said. The rural population accounts for about 60 per cent of gold demand in India, where the precious metal forms an essential part of a bride’s dowry and is considered auspicious as a gift or offering at religious festivals. India’s demand reached 566 tonnes in the first half of the year, a 50 per cent jump but still lower than China’s 600 tonnes, the industry-funded WGC said in its report.

 

Demand this year has been particularly strong as falling prices have prompted consumers across the world to buy bullion in the form of jewellery, bars and coins. Analysts say India’s moves to curb imports have been unable to stifle demand, thus pushing local prices to around $50 an ounce above London spot prices. 

 

Record Buying in China 

China’s gold-buying spree in the first six months of the year is likely to continue into the second half amid festivals and uncertainty about the economy, which has seen a slowdown in nine out of the past 10 quarters. 

 

“The falling gold price is key. But there are also other macroeconomic conditions that are pushing (the Chinese) to gold,” said Albert Cheng, WGC’s managing director for the Far East region. (Agencies)

 

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Appetite for Gold in Nepal Rising

The consumption of yellow metal among Nepali consumers has been following an increasing trend. According to Ministry of Finance (MoF), gold import in Nepal reached 5,807 kg which is worth Rs 26 billion in the fiscal year 2012-13.

 

However, the import of gold was slightly down in the last FY compared to the whopping 5,900 kg in the FY 2011-12.  Traders blame the quota system imposed by the government for the decline in the last fiscal year though their overall gold consumption outlook remains bullish. “Our initial estimation shows that about 26 tonnes of gold will be consumed by the end of current FY in the domestic market,” said Manik Ratna Shakya, general secretary of Nepal Gold and Silver Dealers Association (NEGOSIDA). 

 

Shakya informed that the average daily gold demand in the domestic market stands at 30 kg on average. “The average daily demand in the marriage season stands around 35 kg. We’ve witnessed the seasonal demand of gold up to 50 kg in the past,” he mentioned. Shakya blamed the restrictions imposed on gold imports for the low quantity trade. “The quota system has actually promoted illegal trade and it has some immediate impacts,” he told The Corporate weekly, “The government’s revenue from gold import will decline and the remittance inflow will also suffer as migrant workers may buy gold abroad and send it here using informal channels due to the restrictions.”