The demand for the precious metal will continue to be robust

NEW DELHI India’s gold imports dropped by 5.7 per cent to 215 tonnes in the January-March period of 2013, even as its demand rose by 27 per cent to 256.5 tonnes, World Gold Council (WGC) said on Thursday.

The demand for the precious metal will continue to be robust in the coming months though the government has imposed some curbs on imports, the WGC said, while cautioning that any further supply controls will activate unauthorised channels, WGC said in its report.

Gold import and demand in India, the world’s largest consumer, stood at 228 tonnes and 202.1 tonnes, respectively, in the year-ago period, it said. “Gold imports were 215 tonnes in the first quarter of 2013 as compared to 228 tonnes in the same period last year.

On the bullion market, gold prices dropped to one-month low by losing Rs500 to Rs26,800 per 10 grams on heavy selling by stockists driven by weak global trend.

This fall was in continuation to a steep fall of Rs600 on Wednesday to hit a level last seen on April 17, after the metal tumbled in overseas markets driven by reports investors cutting their holdings. Imports remained lower as stockists had purchased heavily in the previous quarter in anticipation of rise in import duty,” WGC India Managing Director Somasundaram PR told reporters.

Of the total demand of 256.5 tonnes, the WGC said the country’s jewellery demand rose by 15 per cent to 159.5 tonnes from 138.3 tonnes, while investment demand increased by 52 per cent to 97 tonnes from 63.8 tonnes in the review period.

“Gold demand in India for both jewellery and investment continues to remain strong. The price fluctuations in gold recently have only served to reinforce Indian consumers’ appetite for purchasing physical gold,” Somasundaram said.

Good rabi crop and lower gold prices during February led to higher jewellery demand, the WGC said, adding that “the negative impact of rise in gold import duty in late January was for the most part eliminated by these positive factors”.

Sharing outlook for April-June quarter, WGC India chief said demand for gold would remain robust due to lower prices and higher buying in the ongoing wedding and festive season.

The demand will also be fuelled by an expected rise in rural income on good monsoon projected this year. Besides, there are 20 per cent more auspicious days this year and this will drive demand for the precious metal, he said.

Asked if import curbs will reduce demand, he said: “There is nothing to interrupt buying. Trying to restrict gold demand may not be effective. We believe putting further controls on supply side is not going to reduce demand, instead it might encourage unauthorised channels.”

Due to high current account deficit, the government is seeing gold as an expense, while households look at it as an investment, he added.

He suggested that over 20,000 tonnes of gold is kept idle in India and the government should take measures to monetise it to boost the economic activity.

In terms of value, WGC said India’s gold demand rose by 32 per cent to Rs728.99 billion in the January-March period of this year as against Rs551.49 billion in the year-ago period.

Out of this, gold jewellery demand rose by 20 per cent to Rs453.31 billion from Rs377.39 billion, while investment demand increased by 58 per cent to Rs275.68 billion from Rs174.09 billion in the review period.