Gold demand in India, the world's largest consumer, may fall 10 to 15 percent in 2004 from last year as high prices force consumers to suspend or cut purchases, traders said.
Imports of the yellow metal, which accounted for about 70 percent of the country's annual needs in the last few years, may decline even more sharply because of an expected rise in the local supply of recycled gold, they said.
"The year 2004 is going to be a little dicey as no one knows what's the right price for gold," said Ranjeeth Rathod, a bullion trader based in the southern city of Madras.
"Traders and jewellers will have a tough time to market gold this year as consumers have been rejecting the prevailing prices as they think that the current price level is unreasonable."
Traders said India's gold demand could drop to 510-540 tonnes in 2004 from about 600 tonnes last year, if prices remain above $400 an ounce. Imports could fall by up to 20 percent to about 335 tonnes this year because of a rising supply of scrap gold, with more and more consumers taking advantage of the higher prices by selling old jewellery.
Spot gold touched a 15-year peak of $430.50 an ounce on January 6. It was quoted at about $424 an ounce in Asia on Wednesday, up from $409 a month ago and $355 a year earlier, with investors moving out of the crumbling dollar and investing in the safe-haven metal.
Gold, whose price has been determined by movements of the dollar, rose about 20 percent in 2003 on the back of global tension following the US invasion of Iraq. Analysts said gold prices may reach $450 if the euro rallied much above $1.30.
The euro was trading around $1.27 on Wednesday.
In India, domestic prices follow global trends due to the country's high dependence on imports.
"People will still buy gold jewellery but we may not see the volume witnessed in the last couple of years," said Nayan Pansare, an official of jewellery firm Inter Gold (India) Ltd.
Traders said high gold prices could force some consumers, especially rural buyers, to switch over to silver jewellery.
Traders and industry officials said per-capita consumption of gold in India has slowly declined alongside a widening choice of consumer goods, availability of other saving options and the growing popularity of diamonds and white metals such as platinum. They did not provide any future consumption estimates.
"But passion for gold will continue in India even in the coming years due to cultural and social factors," said an industry official.
Indian households stock about 15,000 tonnes of gold, accumulated over generations.
The country has about 300,000 gold jewellery outlets and around three million goldsmiths and ancillary workers.
Gold jewellery forms an important part of any Hindu dowry as parents give their daughters the metal for financial security.
Hindus consider it an auspicious metal and often buy and give it as a gift during religious festivals.
But more and more consumer goods such as televisions, motorcycles and refrigerators have been replacing gold.
People also now spend more on clothes, travel, fashion, and cars and invest more in money and stock markets. "A new segment of young, urban women is emerging in India which likes light-weight gold jewellery with contemporary designs rather than wearing heavy and traditional ornaments," said a Bombay-based jeweller.
Urban India accounts for about 35 percent of India's gold demand, with the rest coming from the rural sector, which prefers heavy and traditional gold jewellery that could easily be converted into money at the time of any financial crisis.
Jewellery accounts for about 85 percent of Indian gold demand.
"Going forward, I don't see a great future of the gold business in India. Young people are not interested in this business as they see that the buying pattern has been gradually changing," Rathod said.
Comments
Comments are closed.