Fall in gold prices not yet a concern for rupee: Nomura

NEW DELHI: Decline in gold prices is not likely to add pressureto India's current account deficit or the domestic currency, as the metal's appeal has diminished, Nomura said in a research note today. 

www.sevagiri.com

According to the global financial services firm, the recent decline in gold prices is not yet a "concern" for the Indian rupee. 

According to the Japanese brokerage firm, since 2009, lower inflation, improved RBI credibility and strong performance in financial assets have diminished gold's appeal as an investment.

Gold prices are currently hovering around Rs 25,000 per 10 grams, after it dropped to a four-year low in the domestic market. 

Moreover, the correlation between gold prices and gold demand in India had turned from "negative" to "positive" since 2009. This change in correlation was attributed to a number of factors including a "growing preference for gold as an investment asset rather than purely as a consumer good", Nomura said. 

As per the brokerage, an investment in the NIFTY index in the 12 months to end-June, would have yielded more returns than an investment in gold in rupee terms. 

"While we acknowledge a potential pick-up in seasonal demand towards the end of the year, this does not change our medium-term constructive view on INR," Nomura said. 

The rupee is hovering around Rs 63 per US dollar. 

It further noted that "coupled with a gradual economic recovery, we note that India's external vulnerability metrics continue to improve, amid signs that the RBI is being less aggressive in its $buying/INR selling intervention". 

Moreover, trade data continued to show weakness in gold demand, with import volumes dropping 21 per cent month-on-month in June by our estimates. 

This is attributed to a number of factors, chief among them the seasonal slowdown in demand during the monsoons. In addition, with rural consumers accounting for the vast majority of gold purchases, the decline in agricultural wage growth is also likely to be a factor in weakening demand, Nomura said.

Source - TOI 

India's Q1 gold demand up 15% on positive mood

India's gold demand during the January-March quarter went up 15% to 191.7 tonne compared with the same period last year, mainly on account of positive sentiment and favourable policy changes, according to the World Gold Council (WGC).

www.sevagiri.com

The total demand stood at 167.1 tonnes during the corresponding quarter last year, according to WGC 'Gold Demand Trends First quarter 2015' report.

In value terms, India's Q1 2015 gold demand grew 9% to Rs 46,730.6 crore, against Rs 42,898.6 crore during Q1 of 2014.

"India's gold demand during the first quarter of 2015 was up 15% compared with the corresponding quarter last year, though it is still below the 5-year average. This growth is a reflection of the muted demand in the same period as last year due to crippling gold import policies, coupled with weak economic sentiment and trade uncertainty at the time of the general elections," WGC Managing Director, India, Somasundaram PR told PTI here.

In contrast, he said, following the partial removal of the import curbs (with the exception of a duty reduction) and the Budget announcements introducing new gold products, the environment for gold has been encouraging in the past few months, resulting in buying behaviour slowly returning to normalcy.

He said factors like an upward revision of GDP growth, the government's approach to bringing gold into the mainstream economy, the country's natural affinity with gold as a savings asset and the modernisation of the jewellery trade will shape a positive environment for gold this year.

"Notwithstanding the unseasonal rains in the early part of the calendar year, which will impact the rural economy, we expect the full-year demand in the range of 900-1,000 tonnes," he added.

The total jewellery demand for Q1 grew 22% to 150.8 tonnes compared with 123.5 tonnes last year.

In terms of value, jewellery demand stood at Rs 36, 761.4 crore, a gain of 16% from Rs 31, 706.4 crore in Q1 last year.

However, the total investment demand slipped 6% during the January-March quarter to 40.9 tonnes compared with 43.6 tonnes in same period last year.

In value terms, investment demand declined 11% to Rs 9,969.2 crore from Rs 11, 192.2 crore in the first quarter of 2014.

Similarly, the total gold recycled in India went down 40% to 18 tonnes in Q1 of 2015, compared with 30 tonnes a year ago.

Going forward, Somasundaram said the coming quarters are expected to be better than the first one, which in India is not considered a good period for gold demand.

When asked about imports this year, he said it is likely to grow in line with demand growth, which is expected to be in the range of 10-15% this year.

Source - DNA india