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MUMBAI (Reuters) - India’s gold demand in the second half of 2013 will be as strong as last year despite a jump in purchases in the first half, due to prospects of good monsoon rains that lift farmers’ income, the key buyers, the World Gold Council CEO said on Friday.
Steady gold buying by India, the world’s biggest consumers of the precious metal, is crucial at a time investors in developed countries are reducing their holdings from gold-backed exchange-traded funds, pushing down prices.
“Based on all the indications, including consumer analysis that we have done, we believe the level of demand that existed last year will continue during the next half,” World Gold Council (WGC) chief executive Aram Shishmanian told Reuters.
“Which means the doubling of demand in the June quarter will not even out demand in rest of the year. There would be net increase in the demand this year.”
Shishmanian also said prospects of more auspicious days when Indians prefer to buy gold for weddings and other functions also augured well for demand for the shinny metal.
Gold jewellery is an essential part of the dowry Indian parents give to their daughters at weddings. Indians prefer organising functions like wedding on auspicious days.
India is likely to import 615 tonnes gold in first half of 2013, compared to 381 tonnes a year ago, the WGC estimates. The country fulfils almost its entire requirement through imports.
Its gold demand in the second half of 2012 stood at 485 tonnes, according to the WGC.
In mid-April within two days gold had fallen 14 percent, making for the worst two days rout since late February 1983. The fall lifted demand in India with people in some places taking the cue to buy jewellery.
Spot gold was trading at $1,411.31 at 1026 GMT, down 0.15 percent.
“The second half of this year would be as strong as last year… This year monsoon is very good. There are 20 percent more auspicious days. Desirability is strongest as has ever been (to buy gold),” Shishmanian said.
More-than half of gold demand in the country is generated by farmers. Monsoon rains are critical for agriculture output and economic growth as about 55 percent of the south Asian nation’s arable land is rain-fed. Agriculture employs more than half India’s population of 1.2 billion.
In 2012 poor rainfall led to a drought in some western and southern Indian states, denting farmers’ incomes. The weather department has forecast normal monsoon for 2013.
India is trying to rein in a record-high current account deficit by discouraging gold imports. The country has raised import duty on the bullion and also restricted banks from consignment imports of gold.
Shishmanian said the restrictions were unlikely to affect demand and would lead to unauthorised imports. Even they can create problems for the economy in the longer run, he said.
(Editing by James Jukwey)
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