For first time in four years, gold import tumbles in Ahmedabad; experts say it’s cyclical.
Wouldn't it have been nice if the 'Midas Touch' wasn't just a fable, more so now when post budget, the yellow metal is poised to reach unaffordable heights?
Precious metal's becoming even dearer is having an adverse affect on its endearing qualities. Gold is not being able to lure customers as is evident from the 2011-12 market. For first time in last four years, demand for gold has fallen with 224 tonne being imported in 2011-12, a fall of 15.47% in Ahmedabad from the 265 tonne imported in 2010-11.
Not only this gold price climbed by Rs7,500 per 10 gram during the year. It started from Rs20,775 per 10 gram on April 1, 2011 to Rs28,275 per 10 gram on March 31, 2012. In the whole year, prices of yellow metal shot up by 36.10%. However, even capital markets didn't do too well in this period, which too led to fall in gold demand in the year.
In terms of value, despite lower volumes, gold import is estimated to be around Rs60,000 crore in 2011-12, while in 2010-11 around Rs45,000 crore of gold was imported. This can be attributed to steep hike of Rs10,000 or 58% in annual average price of gold in last one year. In 2010-11, the average gold price was around Rs17,000 per 10 gram, which shot up to yearly average price of Rs27,000 per 10 gram in 2011-12.
In the last quarter of 2011-12 from January to March, gold import has fallen by 30%. In previous year, gold import during this period was around 78 tonne, which drastically fell to 53 tonne in last quarter of this year.
"It is pure economics — high prices lower demand," said director of GSEC Ltd, Samir Mankad. GSEC Ltd manages air cargo complex at Ahmedabad airport, witnessed lesser demand of gold this year. "It was expected as the gold prices saw sharp rise in last one year. Simultaneously, the economic situation was also not so good," said Mankad.
He further said that this is a cyclical process. "For first time in last four years gold import is down. It happened four years back as well. However, in 2012-13, we are expecting further fall in demand for gold as prices are ready to escalate. And the hike in custom duty over gold will add fuel to fire, which will further lead to fall in demand for gold in the country," Mankad added.
Despite nationwide strike called by jewellers in March, import of gold is much higher than March 2011. "Though strike was on, we continued to import gold," said Mankad.
However, president of Gem & Jewellery Trade Council of India, Shanti Patel differs stating that investment in every avenue was down during the whole year. "Global turmoil, high inflation rate in domestic market, slowdown in real estate, less investment in capital markets decelarated demand for gold. The sudden hike in gold price was a big dampener on the gold demand during the year," he added.
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