Consumer Psyche

Business Line reports that India’s gold imports surged the most in three months in January as falling prices lured the stockists to book to their capacity in anticipation of an imminent rebound.

Data by the Indian Bullion Market Association (IBMA), the trade body representing Indian gold jewelers and importers, show that the total gold import during January rose to a three-month high at 37 tonnes as compared with 27 tonnes in December and 30 tonnes in November 2009. In October, however, gold’s arrival into the country was recorded at 48 tonnes on occasional demand from retail jewelers.

However, last year, in the same month, imports had virtually dried up as the price hit Rs 14,000 per 10 gm in India. In January and February 2009, imports were almost “nil”. Retail consumers and jewelery makers stayed away for a while, though, but returned to the market due to the lack of other asset classes for safe haven investment.

Gold has offered 18 per cent return in the last one year. However, other investment options including real estate, currencies, among others underperformed in the same period.

Gold prices rebounded in the last three days as standard variety of the yellow metal (.995) jumped 2.8 per cent to close on Tuesday at Rs 16,710 per 10 gm. The precious metal, however, stabilized on Wednesday to remain at Rs 16,700 per 10 gm as retail buyers remained absent from active purchases.

After hitting the support level of $1,080 (Rs 16285 per 10 gm in Mumbai) on January 29, gold prices turned to hit $1,123 an ounce on Wednesday. But, the metal got good support from dollar’s weakness as 10 per cent increase in the US unemployment rate in December put a check on dollar’s strength against major global currencies.

Early December, gold price had hit an all-time high at $1,215 an ounce in London pushing the metal in India to Rs 18,220 per 10 gm (Rs 18,340 per 10 gm of pure gold).

“Price-sensitive consumers always plan their investments in the yellow metal when it looks attractive for them. Also, Indian consumers check the potential before passing purchase orders and hence, price variation is directly proportional to gold’s retail buying in local market,” said a trader.

Meanwhile, retail demand of gold halved in the last three days with regular buyers staying away for the time being. Need-based buying, however, continues due to ongoing wedding seasons. But, sales are not remarkable as prices have again started rising, said Ketan Shroff, director of Pushpak Bullions and member of the Bombay Bullion Association.

Much of global purchases were done during the second fortnight of January when prices were a bit low. Since, analysts were bullish towards gold even at this level, a majority of Indian buyers filled their order book position during that period, said Shroff.