"It seems wedding season demand is over. From rural India, demand has fallen significantly as farmers are gearing up for the kharif [monsoon growing] season. They are spending money on seeds and fertilizers, not on jewelllery," said a Mumbai-based dealer with a private bank.
Public sector banks have now started offering competitive rates for gold loans for agricultural purposes with Canara Bank offering loans for a low rate of 5% per annum while other major banks are offering from 6-8 per cent interest rate per annum. New generation banks such as HDFC Bank and ICICI Bank have also come in the forefront promoting gold loans for the common man.One finance company that's the largest in the business is taking the show on the road to the U.K. Muthoot Finance Ltd. is planning to open up three or four branches, hoping to capture business from Asian immigrants.
Bankers say the default rate is much lower for gold loans because Indians do not want to risk losing their family jewelry. And unlike traditional personal loan, no credit checks are needed for gold loans.
According to estimates, the organized gold loan market in India stands at Rs 350-400 billion and has grown at an compound annual growth rate of 40% during 2002-2010 and is expected to grow at an annual rate of 35-40% over the next three years....
"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.
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.Had the rains been below normal levels, Indian demand this year would have shrunk to 650-700 tonnes.
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.
"Households are not buying, while jewellers were waiting for correction," said a Mumbai-based dealers with a private bank dealing in bullion. "For the last few days trading activity has gone down and it seems it will remain like that for next week."A strengthening rupee, which eases prices for buyers, didn't help.
"For the past few days demand is very weak. Jewellers are not interested in buying at current level," said a Mumbai-based dealer with a state-run bank dealing in bullion.The rupee kept falling, which added to the disinclination to buy (outside of any buying panic.)
"We can see improvement in demand if prices fall to $1,480 per ounce or if prices rise above $1,540. Sharp rise in prices will prompt panic-buying."
"Gold funds have opened an entirely new avenue for offering loans to customers. We expect this segment to ramp up aggressively as investors start embracing this form of gold for future investments," said KV Srinivasan, CEO, Reliance Commercial Finance. Reliance Commercial is offering loans to investors of Reliance Gold Savings Fund, wherein, they can get up to 90% loan on value of gold units held up to [50 million rupees] and up to 3 years.One wealth manager is quoted as saying the borrowers may get a better chance if they pledge physcial gold, though.
"Jewellers were not buying as wedding season is almost over, while retail investors were waiting for a correction," said a Mumbai-based dealer with a state-run bank dealing in bullion.
Today demand was almost nil. People were not interested in buying at current level. They may enter into the market if prices fall by significant amount," said Ashok Jain, a Mumbai-based jeweler and a director at Bombay Bullion Association . Wedding season demand wasn't there in the market, he said.
"This week demand remained on lower side compared to last week. Wedding season purchases are almost over. It is unlikely we can see any kind of improvement next week," said a Mumbai-based dealer with a private bank dealing in bullion.At current rupee prices, 21,000 rupees per 10 g means $1,452/oz. Meeting that target would entail quite a drop.
"If prices fall significantly, say up to 21,000 rupees [per 10 grams], then only we can see a rise in buying interest," the dealer said.
* "Demand was weak. People were waiting for correction. They were waiting for level of around $1,470 an ounce," said a Mumbai-based dealer with state-run bank dealing in bullion.
* "Wedding season demand has been falling. Most people have already made purchases for weddings," said a dealer with another state-run bank. Wedding season in India, the world's largest consumer of bullion, will continue through May.
There wasn't any change in buyers' perception. They were waiting for a correction in prices," said Ghanshyam Nichani of Dhanraj Jewellers based in Mumbai. "Wedding season wasn't enough to lift demand."A weakened rupee didn't help new buyers' sentiment, although it was good for people who had already bought.
"Buying has dried-up because prices have moved higher again," said Mayank Khemka, managing director with Khemka Group of companies.On the other hand, somewhat higher prices have not elicited much selling from consumers.
"Inflation will not cool down very quickly because of wage increase in China. People have money in their pocket, and they don't want to keep it in the bank as interest rates are low," said a second Hong Kong-based dealer.Premiums for 1 kg bars in Hong Kong were steady, ranging from $1.20 to $1.70/oz.
"We saw buying when gold dipped below $1,500 from China, India and Indonesia, but not much scrap selling as people are still bullish on gold."
"Yesterday, we saw some buying, but today it is dull," said a dealer with a state-run bullion importing bank in Mumbai.The rupee strengthened, making the price in local terms a little better for buyers. Despite the festival being over, wedding season is continuing for the rest of this month.
"We have received positive feedback from across the country. The business was much better than last year and the sentiment was quite positive," World Gold Council's head, Marketing and Development, Madhumita Dutta told PTI...
Echoing the view, The All India Gems and Jewellery Trade Federation Chairman Bachhraj Bamalwa said this year the sales were much higher and even unconventional markets like the eastern region also did good business on Akshaya Tritiya.
"There are not many deals at current levels, I booked in only 65 kgs from morning at current levels," said a dealer with a state-run bullion importing bank in Mumbai.Sales last Friday, though, were quite strong. The Bombay Bullion Association believes sales volume rose from last year's 15 tonnes to 20 tonnes.
"We opened our shops at 6 o' clock instead of 9 o' clock today [Friday], and people were waiting outside even before," said T.K. Chandran, managing director of DKTM Jewellery Ltd., which has a chain of shops in southern India, including in the cities of Chennai and Coimbatore.Although buyers were attracted to gold, the plunge in silver tended to scare them off. That plummet engendered too much uncertainty, as a 30% drop in a week makes one wonder how much farther the gray metal will drop.
"Our sales so far this year [on Akshaya Tritiya] are already near last year's level," he said at noon, adding, the auspicious time for purchases will end about 1530 hours local time (1000 GMT)....
Ashish Pethe, a partner of Mumbai-based Waman Hari Pethe Jewellers, said he expects sales at its shops to rise about 5% this Akshaya Tritiya from last year's festival day.
"...The decline of the Indian gold mining industry can be directly attributed to the nationalistic policies of Independent India, which for several decades prevented private and foreign investment in exploration and mining for gold,” Deccan Gold Mines Ltd noted in its annual report of 2010. Deccan Gold Mines is the only listed gold exploration and mining company in India.There seems to be a fair bit of gold properties in the country, particularly in the southern India state of Karnataka, as evidenced by a pickup in exploration efforts. Some of those companies are cutting the state-owned companies in, probably as a meant to euchre out outright nationalization.
Deccan Gold Mines Ltd has alleged that “lack of investor friendly regulations and the excessive delays and attendant bureaucracy in the grant of mineral concession permits / licenses. This is further aggravated by the lack of security of tenure of mineral concession licences with the Government coming in at the last moment and reserving the areas for state-owned institutions after the private sector has spent time and effort on exploration. As a result, several of the major and junior explorers that entered India with zeal and enthusiasm have walked away from the country in the last few years.”
Deccan Gold Mines Ltd has challenged in Karnataka High Court the State Government move to reserve the North Hutti Block of Karnataka for state owned Hutti Gold Mines Company Ltd as Deccan Mines had earlier applied for prospecting licence.
"Traders and investors are buying in small lots. Many are staying away to avoid being scorched by any price plunge," said Girish Choksi, a bullion dealer in the western city of Ahmedabad, a key bullion trading center....Some, though, continue to be cautious as they expect further price declines.
"This correction has come in just before the festival and that should help," said Gnanaeskhar Thiagarajan, director of Commtrendz Research. "Such a fall has rarely happened in the past."
He said all retailers may not be selling at lower prices as many had stocked up in advance for the festival, when prices were high.
The price correction is healthy as "it will shake off speculators," Mr. Thiagarajan added.
The opportunity is clear: Indians have traditionally used gold as a store of wealth and hold 10 percent of the global supply, much of it in jewelry. At the same time, more than half of Indian adults operate outside of the formal financial sector, according to the Reserve Bank of India.This type of loan business works well in India, because a lot of people own a lot of gold for largely traditional reasons. Unfortunately, this model won't set down roots in North America because gold is held as investment rather than savings. Also, the pawnshop business is far more disreputable in this continent than in India. Any such loan shop would be heavily regulated because of the risk that it would turn into a disguised fencing operation.
The risk for the industry is that high interest rates and margins and the potential excesses of accelerating competition will draw a regulatory backlash of the sort that has crippled India's once-soaring microfinance sector.
"I must have sold 700-800 kgs from Monday. Since the prices are flat today, they are still on buying side," said a dealer with a state-run bullion importing bank in Mumbai.Silver is also being bought in very large amounts.
