Indian Physical Gold Demand Stiil Weak; May Increase Due To Normal Rainy Season

According to a Reuters report webbed by the Economic Times, a stronger rupee didn't help demand for gold.

"Demand was very weak for the past few days. There wasn't any special occasion to attract retail buyers. They have already finished [wedding] season purchases," said an official at Kiran Jewellers from Jaipur, Rajasthan.

On the other hand, the rainy season looks like it's going to be normal this year - which should boost this fiscal year's Indian demand to 1,000 tonnes from last year's 930 according to the Bombay Bullion Association. Their fiscal year ends on March 31st.

Sales of precious metals typically rise when rains are good as farmers, many without bank accounts, buy gold and silver ornaments when they have a bumper farm output and surplus income. As much as 70%-75% of India's gold demand comes from rural buyers, mainly comprising farmers.

Monsoon rains this year are forecast to be normal and they have set in on Sunday, two days in advance, over Kerala, the southern state through which the weather system enters India's mainland.

"It [monsoon] has come at the right time," Mr. Kothari said.

Had the rains been below normal levels, Indian demand this year would have shrunk to 650-700 tonnes.

In the more immediate term, though, the dry season for gold demand is continuing. Gold is being quoted at a slight discount from spot price.