Wary India watches monsoon, gold scrap sales up
Although demand for gold is seasonally low in India, a price correction could spur purchases ahead of the next festive season.
Singapore/Mumbai: Jewellers in Thailand cashed in gold as global prices extended gains for an eighth consecutive session on Tuesday, while a weaker rupee curbed buying interest in India, the world's main consumer, dealers said.
Jewellers in India are also watching the progress of the monsoon, which could set the tone for demand during the next festive season. Indian farmers, who depend on monsoon rains for a good harvest, contribute to more than half of country's gold demand.
"Business has slumped as prices are very high. They are all waiting for dips below Rs 30,000," said Lokesh Kumar Agarwal, Chairman of Brijwasi Bullion and Jewellers in the northern Indian city of Lucknow.
Gold on India's Multi Commodity Exchange struck a record at Rs 30,415 per 10 grams on the back of a falling rupee and after cash gold gained on hopes the US Federal Reserve may launch more measures to stimulate the world's largest economy.
"If the monsoon is not normal, we expect rural demand to fall by at least 60 per cent," said Harshad Ajmera, proprietor of JJ Gold House in Kolkata.
India's annual monsoon rains have covered almost half of the country, showing signs of a pick-up after falling short in the first 15 days of the season and easing concerns about the planting of summer-sown crops such as rice, corn, cane, cotton and soybeans.
India's gold demand picks up between August and October, when consumers buy bullion to celebrate festivals, which peak with Diwali, the festival of lights in November.
The June-September monsoon rains are vital for agriculture and economic growth, because irrigation covers only 45 per cent of farmland. The farm sector accounts for about 15 per cent of the country's nearly $2 trillion economy, Asia's third-biggest.
"There has been very light buying from India, but it's really quiet there. We've seen sales of scrap from Thailand, but I don't think we can quote premiums at $1 because the market hasn't moved much," said a dealer in Singapore.
"I guess there's a kind of wait-and-see attitude because there's a lot of uncertainty in the market," said the dealer, referring to the debt crisis in Europe that threatens to hurt demand for commodities.
Gold bars were quoted at premiums of 80 cents per ounce to spot London prices in Singapore, unchanged from last week, but lower quality bars fetched lower premiums of 60 to 70 cents.
Trading was also muted in Hong Kong despite light buying by investors as the market shifted its focus to the US Fed's two-day meeting that starts on Tuesday. Gold bars were quoted at premiums of 90 cents to $1.20 per ounce, down from as high as $1.40 last week.
"Trading tomorrow is likely to be cautious as investors await a policy response from the Fed and are afraid to be caught out by volatile price movements in the precious metal," said Phillip Futures analyst Lynette Tan in Singapore.
The Fed appears increasingly likely to offer more monetary stimulus despite political opposition, internal reticence and concerns about whether it will be effective, economists say.
Although demand is seasonally low in India, a price correction could spur purchases ahead of the next festive season, when weddings are normally held. Gold jewellery forms an essential part of the dowry basket and Indian parents give gold to their daughters at weddings.
Recommended For You
- #TrendingMaisie Williams Topless Pictures Leaked Online; Aren't Explicit Says Rep
- VALUE FOR MONEYReliance Jio Impact: Airtel Launches Free Voice Calls And Data Packs
- Source Advisorkhoj#FutureIsCashless, But Your Money Should Grow Too!
- MILESTONE MANIndia vs England: Ravichandran Ashwin Equals Kapil Dev's Mark of 23 Five-Wicket Hauls
- IMPORTED TALENTSouth Africa Born Cricketers Who Have Done Well for England