| MUMBAI, July 18
MUMBAI, July 18 India's gold imports fell by
more than a half in the June quarter and could slide by a third
in the next three months as prices inflated by a weak rupee and
a 4 percent import duty encourage traders to use scrap, a
Reuters poll showed.
India was the world's biggest gold buyer last year but
imports have weakened in 2012, in line with government
expectations, after import duties were hiked in March. Stronger
global prices, and a weaker rupee compared to the U.S. dollar,
have also increased buyers' costs.
Shipments also slowed after economic growth weakened by
nearly half year-on-year to 5.3 percent in the first quarter,
its lowest level in nine years. Inflation of around 10 percent
also ate into Indians' disposable income, reducing their
appetite for gold.
Gold imports could fall 34 percent in the third quarter of
calendar 2012 to 135 tonnes, a Reuters poll of 10 market
"People in India now want steady rates, they are fed up with
the fluctuation in prices," said Kumar Jain, vice-president of
Mumbai Jewellers Association, which groups 10,000 members.
Imports in the second quarter to June are estimated to have
fallen by 55 percent to 135 tonnes, the poll showed. In the
first three quarters, India is estimated to have imported $27
billion of gold, broadly in line with the government's target.
The government wants to cut gold imports to $38 billion in
the fiscal year to March 2013, down 38 percent on the year, to
help rein in a bulging current account deficit. Imports during
April and May were down $6.2 billion.
Weak monsoon rains so far this season could also dent gold
demand from rural areas, which make up about 60 percent of the
"Rural gold jewellery purchases in India are expected to
suffer as reduced harvests negatively impact disposable
incomes," said Citi Group in a research note on July 16.
China could trounce India as the world's biggest consumer in
2012 on persistent weakness in imports at home.
Since the start of the year, gold has moved in a wide range
of 27,814-30,428 rupees per 10 grams. On Wednesday, gold was
trading at 29,235 rupees, after hitting a peak of 30,428 rupees
on June 19.
Prices are expected to remain steady at 29,750 rupees per 10
grams in the third quarter on expectations the rupee will remain
steady against the U.S. dollar or even reverse from its record
low struck in mid-June.
"Some appreciation could be seen in rupee in the coming
quarter," said Pranav Mer, senior analyst with Mangal Keshav
The rupee could firm due on expectations of bigger dollar
inflows into the stock market, Mer said. The rupee plays an
important role in determining the landed cost of gold, which are
quoted in dollars.
Analysts expect the amount of recycled scrap to jump 66.7
percent to 25 tonnes in the third quarter as higher prices
entice traders to melt their old gold into newer designs.
"People have already liquidated scrap in the second quarter.
They will wait to sell more scrap for the higher prices of
31,000-32,000 rupees," said Mayank Khemka, managing director
with Khemka Group, a wholesaler in New Delhi.
Indians are estimated to own about 20,000 tonnes of gold,
about three times higher than the gold holdings with the U.S.
Federal Reserve, in the form of jewellery, coins and bars, which
consumers melt down to take advantage of any spurt in prices.
China's old gold scrap supply stood at 124.7 tonnes, the
second biggest after the United States, while India's recycled
supply stood at 57 tonnes, nearly half of China's.
"At a time imports are getting restricted, people with
jewellery are the kings," said an official from bullion
importing IndusInd Bank in Mumbai.
(Editing by Miral Fahmy)