Gold imports by India will decline for the first time in three years in 2012 as rising prices deter jewelry buyers and investors, potentially allowing China to overtake the nation as the world’s largest consumer.
Imports may drop 7.1 percent to 900 metric tons this year, according to the median estimate in a Bloomberg News survey of eight analysts, brokers and jewelers including Rajesh Exports Ltd. (RJEX), the biggest gold-jewelry exporter. India bought a record 969 tons in 2011, according to the World Gold Council.
Falling imports may help to halt a rally in global prices that's set for a 12th year. Gold has surged as investors seek to protect their wealth from volatility in stock markets, depreciating currencies and the threat of inflation.
“If we see higher gold prices, it implies lower imports into India,” Jeffrey Rhodes, head of precious metals at INTL Commodities Inc., said in a phone interview from Dubai. “The higher the gold price, the same amount of money buys less.”
Imports plunged 44 percent in the fourth quarter to 157 tons as jewelry demand slumped 44 percent to 103 tons and investment demand declined 38 percent to 70 tons, the council said on Feb. 16. Annual gold demand fell 7 percent to 933.4 tons in 2011, compared China’s 769.8 tons, it said.
Bullion futures in India rallied 32 percent last year, touching an all-time high and exceeding the 10 percent advance in global prices, as the local currency slumped to a record low against the dollar. Higher prices cooled demand among investors and jewelry buyers, said Ramesh Pahlajani, partner at Bherumal Shamandas Jewellers.
Bridal Trousseau
“With the prices of gold going up, nothing fits into the budget of the customer,” Pahlajani said in an interview. “Demand for gold has been quite subdued.”
In India, gold is traditionally bought during festival seasons and for marriages as part of the bridal trousseau. The number of days this year considered to be auspicious for weddings will be the fewest since 2004, potentially trimming gold demand, Ajay Mitra, managing director, Middle East and India at the council, said on Feb. 16.
“The amount of gold I buy has been reduced and we have to budget our expenses,” said Khushboo Jain, 24, while shopping in Zaveri Bazaar, Mumbai’s main jewelry market, ahead of her April wedding. “I am buying for my marriage and in the future it will be an investment for me in times of financial crisis.”
Gold for immediate delivery rose 0.5 percent to $1,731.35 an ounce at 4:46 p.m. in Singapore yesterday. The metal reached a record $1,921.15 an ounce in September.
‘Every Household’
“Gold is still something that every household believes in owning,” said S. Subramaniam, chief financial officer at Titan Industries Ltd. (TTAN), India’s biggest retailer of gold jewelry. “Gold is not just about an ornament or adornment, it’s about investment as well.”
Gold holdings in exchange-traded products were 2,388.683 tons on Feb. 17, near the record 2,392.976 tons reached Dec. 13, according to data tracked by Bloomberg. In India, investors held a record 96.14 billion rupees in funds backed by gold as of Jan. 31, according to the Association of Mutual Funds in India data.
“Demand in India has been slow as expenses have been rising because of inflation,” Rakesh Jain, owner of Mohanlal Otarmal Jewellers in Mumbai, said in an interview at his store in Zaveri Bazaar. “People do not have much savings to spend on gold. The buying capacity of people has gone down.”
To contact the reporters on this story: Madelene Pearson in Mumbai at mpearson1@bloomberg.net; Swansy Afonso in Mumbai at safonso2@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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