Thursday, February 23, 2012

>India Goes Easy On Gold Buying In Oct-Dec As Rupee Slides

Depreciating rupee and high gold prices have jointly forced to India to cede its long-held position as the world’s No. 1 con-sumer of the precious metal to China in October-December.

India and China together account for more than half of total global demand for gold, with demand from India typically surpassing that of China’s. But the fourth quarter of 2011 registered a change in the trend.

According to World Gold Council data, total demand for gold in India was 173 tonnes in October-December, down 42% from a year ago. Demand in China, on the other, increased marginally from a year ago to 190.6 tonnes.

While both countries registered high inflation, particularly in the first half of 2011, weakening of the rupee against the US dollar dampened demand for gold in India.

In October-December, while gold prices rose 23.5% in dollar terms from a year ago, in rupee terms, gold prices shot up a whop-ping 39%.

Rupee depreciated 8.4% versus the dollar during the quarter, while the Chinese yuan that appreciated 0.2% in the same period.

On December 16, rupee weakened to its all-time low of `54.30 versus the dollar.
Impact of rupee depreciation is also reflected in the fact that while international gold prices (in dollar terms) fell 0.8% in October-December on a sequential basis, Indian prices were up 8.8% dur-ing the same period.

In the quarter that went by India’s jewellery demand nosedived 44% from a year ago to 103 tonnes and investment demand plunged 38% to 70 tonnes.

It was mainly depreciation of rupee in the second half of the year that resulted in India’s gold demand during July-December weak-ening 33% from the first half.

To read full report: GOLD