Gold imports by India are poised to decline for the first time in three years as rising prices deter jewellery buyers and investors, potentially allowing China to overtake the country as the world’s largest consumer.
Purchases may drop seven per cent to 900 tonnes this year, according to the median estimate in a Bloomberg News survey of eight analysts, brokers and jewellers including Rajesh Exports Ltd, the biggest gold-jewellery exporter. India bought a record 969 tonnes in 2011, according to the World Gold Council.
Bullion is climbing for the 12th year as investors seek a store of wealth amid volatility in stock markets, depreciating currencies and the threat of inflation. China’s consumption may surpass India this year after surging 20 per cent to 769.8 tonnes in 2011, the council says. Use in India fell seven per cent to 933.4 tonnes last year as the currency slumped to a record low, cooling purchases for festivals and marriages.
“With the prices of gold going up, nothing fits into the budget of the customer,” Ramesh Pahlajani, partner at Mumbai-based Bherumal Shamandas Jewellers, said in an interview. “Demand for gold has been quite subdued.”
Imports plunged 44 per cent in the fourth quarter to 157 tonnes as jewellery and investment demand declined, the council said on February 16. Bullion futures in India rallied 32 per cent last year, exceeding the 10 per cent advance in global prices.
Bridal trousseau
In India, gold is traditionally bought during the festival season and for weddings as part of the bridal trousseau. The number of days this year considered to be auspicious for marriages will be the fewest since 2004, potentially trimming demand, Ajay Mitra, managing director, West Asia and India at the council, said on February 16.
“The amount of gold I buy has been reduced and we have to budget our expenses,” said Khushboo Jain, 24, while shopping in Zaveri Bazaar, Mumbai’s main jewellery market, ahead of her April wedding. “I am buying for my marriage and in the future it will be an investment for me in times of financial crisis.”
Gold for immediate delivery climbed 0.4 per cent to $1,742.02 an ounce at 2.46 pm in Mumbai on Tuesday. The metal reached a record $1,921.15 an ounce in September.
“Gold is still something that every household believes in owning,” said S Subramaniam, chief financial officer at Titan Industries Ltd, India’s biggest retailer of gold jewellery. “Gold is not just about an ornament or adornment, it’s about investment as well.”
Gold holdings in exchange-traded products were 2,389 tonnes on February 17, near the record 2,393 tonnes reached December 13, according to data tracked by Bloomberg. In India, investors held a record Rs 96.14 billion in funds backed by gold as of January 31, according to the Association of Mutual Funds in India data.
“Demand in India has been slow as expenses have been rising because of inflation,” Rakesh Jain, owner of Mohanlal Otarmal Jewellers in Mumbai, said in an interview, at his store in Zaveri Bazaar.
“People do not have much savings to spend on gold. The buying capacity of people has gone down.”
