The plunge in gold to an almost three-year low has failed to lure shoppers in India, the world’s largest consumer, as state curbs and a decline in the rupee to a record bolster the costs of imported metal.
Inbound shipments may tumble 52% to 150 metric tons in the three months starting July 1 from a quarter earlier as buyers keep away from stores, Bachhraj Bamalwa, a director at the All India Gems & Jewellery Trade Federation, said in an interview yesterday. Prices in India have fallen 15% this quarter, less than the 25% drop in London after the rupee lost 8.6% against the dollar to an all-time low.
“I will wait for prices to fall further and stabilize before buying anything,” Niranjan Sahoo, 41, an engineer by profession, said by phone from Angul in the eastern state of Odisha. “Prices will fall further between July and August and if they fall to 20,000 rupees per 10 grams I plan to buy 50 grams and keep it for my daughter’s marriage.”
While a 14% slump in prices in two days in April led to a buying frenzy from China to India and the U.S., shoppers are now waiting for bullion to extend the decline from near the lowest level since August 2010. That may accelerate the biggest quarterly slide since at least 1920 after investors cut bullion holdings to a three-year low.
“The most obvious disappointment is India, as buyers there struggle to cope with both a weaker currency and recent government measures,” UBS AG analysts Edel Tully and Joni Teves wrote in report yesterday. “In addition to muted appetite on the back of the latest developments, the lack of clarity on what the new restrictions on the Indian gold market mean exactly for all those involved is also a contributing factor to the weakness.”
Futures tumbled to as low as 24,941 rupees ($420) per 10 grams on the Multi Commodity Exchange of India Ltd. today, the cheapest since August 2011. The contract for delivery in August traded 1.3% lower at 25,049 rupees at 5:36 p.m. in Mumbai. Immediate delivery gold in London was 0.1% higher at $1,202.23 an ounce, 28% down this year.
Gold is heading for its worst year since 1981 after some investors lost faith in it as a store of value amid speculation the U.S. Federal Reserve will curb debt-buying. Demand in India has fallen after the government increased taxes on imports twice this year to try and rein in a record current-account deficit. The central bank has curbed overseas purchases on a consignment basis and limited imports for local consumption against cash only, prompting retailers to halt sales of coins and bars.