Low prices one more reason for Indians to buy gold during festival season

Gold purchases in India are poised to climb in the final quarter to the highest level since 2012, adding to signs that lower prices are spurring a resurgence of buying in Asia.

Demand may jump as much as 15 per cent from a year earlier, said Bachhraj Bamalwa, a director with the All India Gems & Jewellery Trade Federation.

That would increase consumption to about 230 tonnes, the highest for the quarter since 261.9 tonnes in 2012, World Gold Council data show. India vies with China as the world’s biggest gold consumer.

A decline in global prices to the lowest level in more than five years in July has fuelled physical demand in Asia.

A shock devaluation of the Chinese currency last month and a rout in equity markets also helped buying.

In India, demand usually peaks in the final quarter with gifting during festivals, which begin at the end of September this year and culminate with the start of the wedding season in November.

“The off-season demand was not very bad this year because of the lower prices and that’s why we expect the festival season to be good as well,” Mr Bamalwa said from Kolkata.

“We saw higher imports coming in the last month, showing that jewellers are preparing for good demand for festivals and weddings.”

Swiss exports of gold to India increased to 66.9 tonnes in August from 66.2 tonnes in July.

Shipments to China jumped 49 per cent to 17 tonnes and they more than doubled to Hong Kong, reaching 36.2 tonnes, according to data on the website of the Swiss Federal Customs Administration.

Imports by India probably rose to 120 tonnes in August from 89 tonnes a month earlier and overseas purchases may be 250 tonnes in the final quarter, Mr Bamalwa said.

Futures on the Multi Commodity Exchange of India plunged to the lowest in almost four years in July and traded at 26,295 rupees per 10 grams late morning in Mumbai yesterday.

“We are very confident about how the season will turn out,” CK Venkataraman, chief executive for jewellery at Titan, said by phone from Bangalore. Current price levels will be good enough to attract customers, he said.

About 60 per cent of demand in India comes from rural areas, where most people depend on farming.

While monsoon rains have been 13 per cent below normal, farmers have increased plantings and rural demand may not be affected, Mr Bamalwa said.

The nation imported 891.5 tonnes in 2014, WGC data show.

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