Strong Rupee, Lower Prices To Boost Indian Gold Imports

The appreciation of the rupee, a decrease in world prices and the forthcoming wedding season are likely to lead to a rise in Indian gold imports in the weeks to come. India is the world’s largest importer and consumer of gold.

Indian demand is also seen rising due to the onset of the summer crop harvests that will likely increase farmers' disposable income and their demand for gold.

Abundant crops are forecast this year due to the best monsoon rains for 10 years, and farmers are expected to invest part of their income in gold.

Meanwhile, April and May are the busiest months for weddings in the mostly Hindu country. Gold jewelry features strongly in Hindu marriages, with parents giving their daughters gold gifts as a form of financial security.

The strengthening of the rupee in recent weeks has seen the price of gold fall by around $14 an ounce as the rupee has gained by close to four percent against the dollar in the past two weeks.

Although the rise in the rupee is good news for jewelry manufacturers since it lowers the cost of imports of gold, diamonds and other materials, it is bad news for exporters whose goods are less competitive.

Indian exporters have moved to invoicing in euros to reduce the impact of the stronger rupee against the dollar, according to analysts.

Although Indian analysts see the impact of the strengthening of the Indian rupee as limited in the short run, they fear foreign diamond buyers and jewelry may eventually be forced to buy from other markets.