Financial Daily from THE HINDU group of publications
Wednesday, Mar 03, 2004
Agri-Biz & Commodities
Gold & Silver
`Gold jewellery losing lustre'
Canberra , March 2
GOLD jewellery does not lure Indian consumers anymore. At least, as far as the Australian Bureau of Agricultural and Resource Economics (Abare) is concerned.
If one is to go by Abare Commodities Outlook 2004, then jewellery consumption in the country has declined by 38 per cent since 1998.
But if one were to take into credit the record import during 2001, then the decline in actual terms could have begun since 2002, when the yellow metal began its bull run.
"In 2003, gold jewellery consumption is estimated to have fallen by six per cent to 620 tonnes, despite India's relatively auspicious monsoon season," Abare said in its Metal Outlook to 2009.
Gold prices, which had hovered around $270 per ounce (around Rs 12,236) in 2001, are currently ruling around $400/oz (around Rs 18,128). The prices averaged $309 (around Rs 14,004) in 2002 and over $365 (around Rs 16,542) in 2003. During the last quarter of 2003, the prices, in particular, ruled above $400.
The rates of yellow metal gathered momentum on the September 11 terror attacks in the US, fears of terrorists strikes, the US going to war with Iraq and the weakening of the dollar.
"India's currency (the rupee) has only appreciated slightly against the US dollar over the past year and, as a result, high domestic gold prices have discouraged purchases," Abare said.
The observation holds true as during the fourth quarter of 2003, imports declined 33 per cent to 128 tonnes, including the 21.3 tonnes estimated to have been brought into the country by the non-resident Indians.
For the current year, Abare doesn't paint a rosy picture as far as Indian consumption is concerned.
One, it expects prices are expected to average around $410/oz (around Rs 18,581) if the dollar continues to rule weak. Two, as Abare says, "in 2004, increased demand driven by robust economic growth, particularly in agricultural sector, is expected to only partially offset the negative effects of higher gold prices. Consequently, jewellery consumption is forecast to fall again."
The organisation expects gold prices to decline in 2005 on strong dollar and that, in turn, is expected to buoy Indian demand.
However, there is another interesting aspect to statistics that are available. Recycling or use of gold scrap increased to 930 tonnes in 2003 from 843 tonnes in 2002. nd analysts are of the view that Indian consumers had resorted to recycling old jewellery.
The decline over the years has been despite the Government coming out with consumer-friendly measures like cutting the customs duty on the yellow metal.
From Rs 400 per 10 g, the customs duty was cut in 2001 to Rs 250 and again in 2003, it was further reduced to Rs 100.
According to Indian gold jewellery makers, consumers have been keeping away ever since gold touched $400/oz in the international market.
At home too, the prices have been found unviable at over Rs 5,500 per 10 g. A section of the industry feels that the trade has been sustained by gold turning into a fashion statement.
The rise in prices also led to less hoarding of gold bars, while gold as an instrument of investment saw a more than four-fold rise to 591 tonnes.
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