Indian Gold-Good monsoon seen fuelling demand
05:43 a.m. Jul 03, 1998 Eastern
By Sambit Mohanty
NEW DELHI, July 3 (Reuters) - Indian gold imports are expected to rise
in coming weeks on increased demand from farmers, but are unlikely to
surpass 1997 levels because of the weak rupee, trade officials said on
Friday.
''Domestic gold demand will certainly rise from farmers -- as a result,
imports will rise,'' Makhan Lal Damani, president of the Bombay Bullion
Association, told Reuters.
The India Meteorological Department (IMD) has predicted plentiful rains
in the four-month monsoon season that started on June 1. Good monsoon
rains generally boost farmers' incomes by raising agricultural output.
Vinay Mehra, president of New Delhi gold trading firm Dunroll
Industries, said: ''I think demand will pick up during the monsoon
season.''
Agriculture Minister Som Pal said this week that India was hoping to
produce a record 203-205 million tonnes of foodgrains in the 1998/99
(July-June) crop season because of the forecast of good rains.
India imports almost all its gold. The country's main demand comes from
farmers, who use the precious metal for saving, and from about 10
million weddings, which absorb more than 300 tonnes of the metal.
Trade officials said gold imports were not expected to surpass last
year's level as domestic prices had risen. Gold in the domestic market
was currently quoted at about 4,330 rupees ($102) per 10 grams ($316 per
troy ounce).
But World Gold Council (WGC) officials expect India's gold demand, which
was about 737 tonnes in 1997, to grow by 10 percent in 1998.
According to the Bombay Bullion Association, India imported about 650
tonnes of gold in 1997. The rest of the demand was met through recycled
gold.
Trade officials said the sharp fall in the rupee against the U.S. dollar
had made imports costlier and so pushed up domestic prices. This would
hit domestic demand.
''Although there will be a rise in demand during the monsoon season,
imports will be about 600 tonnes this year because of a weaker rupee,''
Damani said.
Mehra said: ''The rise in international prices has also affected our
domestic prices.''
Officials said gold demand would drop as gold speculators restricted
purchases because of high prices, but predicted rural demand would
remain high.
''People in the rural areas would still buy it for hoarding because
their forefathers were doing it,'' Mehra said. ''They will not think
whether the rupee has risen or fallen.''
India's main gold buying seasons are during the marriage seasons of
April-May and November-December, and the Hindu festival season of
October.
''Demand will pick up very soon for marriage, festival and monsoon,''
Mehra said.
Finance Minister Yashwant Sinha raised import duty on gold to 250 rupees
per 10 grams ($18/troy ounce) from 220 rupees in the federal annual
budget for 1998/99 (April-March) presented on June 1.
Mehra said the move could lead to a rise in gold smuggling as importing
the metal through legal channels had become costlier. ''This will also
contribute to a fall in imports.''
($1- 42.5 rupees)
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Copyright 1998 Reuters Limited. |
