Commodity Online
MUMBAI : India’s leading gold dealers' organization, the Bombay Bullion Association Ltd (BBA) on Wednesday said the country’s gold imports could plunge by 50% in June as higher prices of the yellow metal and weak currency are prompting jewelry buyers and gold traders to stay away from the bullion spot market.

In a statement issued here the BBA said, gold purchases by India, the world’s biggest importer, were 8 to 10 metric tons in the first three weeks of June, compared with 17 to 18 tons for the same period in 2008.

Gold traded in Indian rupees has gained 18 percent in the past year as the currency fell on concerns of foreign investors withdrawing funds from emerging markets.

India’s bullion imports have fallen for nine straight months because of high prices and increased supply of scrap jewelry.

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Bullion analysts said high gold prices and dropping jewellery sales are again hitting India's gold imports. Bombay Bullion Association (BBA) figures said last month that gold imports by India had fallen by 50% to stand around 15 tons for the month of May. In April, India had imported around 30 tons of gold.

Gold imports to India, the world's largest importer and consumer of the yellow metal, has been plunging thanks to volatility in gold prices and dropping sales in jewellery. In January, gold imports to India was a paltry 2 tons, where imports dipped to zero levels in February and March.

India used to import around 700 tons of gold every year, some years back. But in 2008, import of the yellow metal had declined to around 400 tons.

While religious festivals and the gold buying marriage season propelled gold imports in April, imports have dipped again in May. BBA president Suresh Hundia said that reasons for the plunging gold imports are the rally equity markets and the continuing high prices of gold in the bullion market.

In April, a bullion research report from Commodity Online had said that India will have the lowest gold import in 2009 in the last eight years.

”We expect gold imports by India to be sluggish in 2009. There will not be much momentum in gold sales and imports in the country thanks to the high gold prices, volatility in markets and global economic conditions,” said Nitin Khanna, bullion research head at Commodity Online.

Khanna has predicted that gold imports by India could stand around 200 tons this year if this trend continues. He said gold imports and sales will gain in the months of August, September and November thanks to festivals like Diwali and Onam. “However, current bullion trade scenario suggests that countries like China will import more gold than India,” he said.

Following are the Commodity Online research findings on India gold imports:

**In the last eight years from 2000, gold imports by India every year have been between 400-800 tons. In 2008, India’s gold imports dipped by 45 per cent to touch 450 tons.

**India managed to import only around 32 tons of gold during January, February, March and April, 2009.

**Buying of gold jewellery has fallen sharply in the last four months leading to a slump in the yellow metal’s imports.

**Bombay Bullion Association assessment says gold sales and demand have dropped to negligible levels because of high prices and gold and jewellery sector is reeling under a crisis because of high prices and retrenchments across sectors.

**Current gold prices in India are hovering around Rs 14,000 for10 grams. Bullion traders expect gold prices could zoom to Rs 15,000 per 10 grams in the coming months, leading to a dip in gold imports.

**Fall in gold demand has been thanks to high prices of the yellow metal. Gold prices have moved up as investors found heaven in the yellow metal on fear of deflation. But even though investment in gold looks attractive, many investors have been struggling for survival after they lost money in commodities and equity markets.

**Gold prices could zoom to higher levels because of the dollar-euro movements on weak economic fundamentals.

**One major reason why gold imports by India are plunging is because Indian banks have a lot of carryover gold stocks from last year resulting in lower imports.