Poor monsoon rainfall not to dampen Indian gold demand

Poor monsoon rains in India are unlikely to have an immediate impact on the country's gold demand which is seen growing from mid-August with the beginning of the festival season, traders said on Wednesday.
They said imports were not under threat as the cumulative effect of erratic monsoon rains this year on rural incomes, which drive the demand for gold, will be known only after the start of winter harvests in December.
"The recent fall in gold prices has brought buyers back to the market," said Ashok Choksi, a bullion dealer in Ahmedabad, a large importing centre in the western state of Gujarat. "The poor monsoon is not likely to hit demand in the short term."
Jewellery accounts for about 80 percent of Indian gold demand, with the rural sector consuming about 60 percent of the country's gold needs.
Boosted by impressive farm output, the Indian economy is estimated to have grown by more than eight percent in the year to March 2004, from four percent the previous year.
Gold demand in India grew 25 percent to 149 tonnes in the first quarter of 2004 from the corresponding period of the previous year, according to figures compiled by the Gold Fields Mineral Services for the World Gold Council.
In 2003, gold demand rose by three percent to 588 tonnes, from 570 tonnes a year earlier.
Traders said demand for gold would improve from mid-August when the Hindu festival season starts and weddings are conducted in southern India.
Jewellery forms an important part of Indian marriages, as parents gift their daughters the metal for financial security. Hindus consider gold an auspicious metal and like to buy or gift it during religious festivals.
"Demand will go up in August in any case, but if prices ease further it will be a double bonus," said Ranjeeth Rathod of Madras-based MNC Bullion Pvt Ltd.
Gold prices were quoted at $388.25/$388.75 an ounce in Asia at 0354 GMT on Wednesday.
Rathod said there would be no immediate impact of the monsoon on gold demand but its effect on buying would be known by early next year.
Gold imports in southern India were expected to rise by 20 percent to 225 kg per day in August from the previous month and the pattern could be similar in the rest of the country, he said.
Prithviraj Kothari, a Bombay-based dealer, said imports in the city should more than double to about 800 kg a day in August from the previous month because of festivals.