Indias demand for gold has revived, with the country importing small amounts for the first time in two months, and is seen strengthening with a festival falling at the end of April, dealers and traders said on Monday. Indias demand for gold revived when gold broke below the psychological level of $900 an ounce on Thursday and some dealers said they had placed orders overseas to replenish stocks.
"We have placed a lot of orders from Thursday onwards," said a dealer in a private bank. "If gold remains below 14,500 rupees ($290) per 10 grams, demand will continue to be there." A gold supplier to India said demand was low, but may get stronger ahead. "There is some demand around, but still nothing to write home about," said Afshin Nabavi, head of trading at MKS Finance, a Geneva-based gold supplier.
"I think with the festivities approaching and the gold price coming off, there may be some demand (in the near future)." Gold prices fell more than two percent on Monday in Asia, sliding towards a 2-1/2 month low near $870 an ounce as regional shares climbed to a six-month high, signalling reduced risk aversion among investors hoping the worst has passed for the United States economy.
Gold has now fallen about 13 percent since touching an 11-month high above $1,000 in February. Last month, the head of an Indian trade body said the country had imported no gold for the second month in a row in March as high prices dented consumer demand in the worlds biggest market for the metal. "Our records are showing zero so far," Suresh Hundia, president of the Bombay Bullion Association (BBA) told Reuters. "Scrap sales have reduced, but demand is not there either."
Imports in February and March last year were 23 tonnes and 21 tonnes respectively. India has been the worlds biggest buyer of gold for years, but imports slumped 48 percent in 2008 to 396 tonnes. The falling trend has continued this year with imports in January plunging 89 percent from the same month last year to 1.9 tonnes.
But the demand picture could brighten soon. Akshaya Tritiya, one of Indias two biggest gold-buying festivals along with Dhanteras, falls on April 27 when citizens, specially in the south, are expected to buy gold regardless of price, as they believe it will ensure lasting prosperity.
Last year, Akshaya Tritiya sales were at 48.99 tonnes, down 11 percent from 2007, data from the World Gold Council shows. A large trader in Chennai said retail sales had not picked up yet, but manufacturers were buying gold in preparation.
"Retail customers are still absent," said Daman Prakash, director of MNC Bullion in Chennai. "With Akshaya Tritiya so close, they would be waiting for discounts." Shops in south India will start to advertise for the festival from mid-April, luring customers with discounts or schemes such as free making charges, even free car parking. Shops will open early and shut late, with jewellers expecting to see queues forming even before they raise their shutters for business.
QUANTITY MAY FALL: But even as thousands throng shops, the volumes bought by each customer may dip if prices rule around current levels, traders and dealers said. "The quantity may halve," said Prakash. Dealers in banks said they were not certain sales would be satisfactory.
"We are hopeful... we cant say," said a dealer in a large bank when asked how he expected festival sales to pan out. Indias gold prices in rupees hit an all-time high on February 20 to stand at 16,040 rupees ($320) per 10 grams, up 34 percent on the year.
On Monday, gold was quoted at 14,174 rupees, down from the previous session, tracking foreign markets and a stronger rupee currency against the dollar. But a further fall close to $800 may send sales zooming, Prakash said. "My purchases would go overboard if it goes to $800," Prakash, who supplies gold to smaller traders and jewellers in several Indian states, said.