India 2011 gold imports seen jumping 64%

Gold imports in India, the world’s largest consumer, are likely to jump 64 percent to 500-550 tonnes in 2011, driven by investment purchases that are likely to affect world prices, the head of a trade body told Reuters on Friday.

“If prices fall further to 18,000-19,000 ($514-$543) rupees (per 10 grams), the import figure would be over 600 tonnes,” said Prithviraj Kothari, president of the Bombay Bullion Association, a 400-member strong trade body.

“Much would also depend on how monsoon pans out, inflation behaves and performance of the equity markets,” Kothari said.

Monsoon rains play an important role in rural areas, which depend on agriculture and allied activities for sustenance and contributes to over 60 percent of gold demand.

Demand in 2010 had been stronger after a 19 percent decline in 2009, when the worst monsoon in nearly four decades dented sales.

Traders said the harvesting festival, which would start with pongal in Tamil Nadu, would set a strong pace for gold sales in 2011, followed by the wedding season next month.

Kothari said volumes on the Exchange Traded Funds are likely to jump 4 times to 50-60 tonnes as investors seek a safe hedge against rising inflation and diversify their portfolio to offset losses in the declining stock market.

“We could see 100 percent jump in (ETF) volumes,” said Kothari.
Prices of the yellow metal, which traded at US$1,359 ($1,764) an ounce on Friday, are likely to fall to US$1,270-1,300 by March-end weighed by a strong dollar overseas, Kothari said.
“This would be due to strong US dollar supported by strong economic indicators,” said Kothari. A rising dollar dims the yellow metal’s appeal as an alternative investment.

Kothari said the Reserve Bank of India’s decision to grant licenses to seven more banks to import bullion is a good sign for the gold trade. “It’s a good sign for trade and this would restrict monopoly of a few banks, and small traders, jewellers would get easy supplies,” said Kothari.

India’s central bank has allowed 7 more banks to import gold and silver, taking the total to 30 banks, a move that will smoothen supply.
Karur Vysya Bank, Punjab and Sind Bank, South Indian Bank, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore and State Bank of Travancore, are the new banks that have been given permission, data on the Reserve Bank of India’s (RBI) website showed.

The flow of scrap in 2011 is expected to fall from a yearly average of 200 tonnes, which could boost imports.

Silver imports in India are also expected to jump, but at a quicker pace than gold.
Shipments are expected to more than double to 2,500 tonnes in 2011 as the white metal has caught the fancy of investors seeking higher returns.

Silver prices rose 83 percent in 2010, far higher than gold’s 29 percent gain.
“Silver imports are seen on a higher side, and consumption would be also higher due to the industrial use of the metal,” said Kothari, adding “It’s a cheaper investment option. They are investing into coins and bars.”

Kothari expects silver prices to be at US$32-34 an ounce, up 19 percent from the current US$28.5 an ounce on Friday. – plushasia.com

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