Gold sales may dip to 8 year low

Rural slump to hit market in Dec. quarter

India’s gold buying in the key December quarter is likely to fall to the lowest level in eight years, hurt by poor investment demand and back-to-back droughts that have slashed earnings for the country’s millions of farmers.

The sluggish demand could halve imports by the world’s second-biggest gold consumer in US dollar terms in the final quarter, a retailer and two bank dealers said, putting further pressure on global prices that hit a five-year low earlier this month.

The December quarter demand could fall to 150 to 175 tonnes, said Bachhraj Bamalwa, a director with the All India Gems & Jewellery Trade Federation, from 201.6 tonnes a year ago and a five-year average for the quarter of 231 tonnes, according to World Gold Council data.

The December quarter usually accounts for about a third of India’s gold sales as it takes in the start of the wedding season as well as festivals like Dhanteras and Diwali.

Two-thirds of demand comes from rural areas, where jewellery is a traditional store of wealth, but weak monsoon rainfall this year due to an El Nino weather pattern has eroded farmers earnings and their purchasing capacity. A weak rupee has also kept local gold prices relatively strong compared with a slump in dollar-denominated gold, further denting demand, while inves-tment buying has stalled as investors see little chance of a quick price recovery.