Gold prices in India back to discount on weak monsoon fears

NEW DELHI (Scrap Monster):  The gold bullion prices in India were back to discount to global benchmark prices, for the first time in almost two months period. The gold demand in the country witnessed significant drop following fears of weaker monsoon.

Gold dealers were seen offering discounts starting from 50 cents up to $4 per ounce during this week. This is when compared with premiums ranging from 70 cents to $1.50 per ounce last week. It must be noted that plunge in gold demand had taken gold prices to a discount of up to $15 during the month of July this year. Domestic gold prices in India had touched four-year lows during late July, tracking global gold price meltdown, but have managed to recover almost 8% since then.

According to forecasts by the India Meteorological Department (IMD), monsoon rains in the country are likely to see nearly 12% shortfall during 2015 when matched with long-term averages. IMD further states that 2015 may turn out to become the driest year since 2009. Scarce rains may badly impact farm output, which in turn may take a hit at income of rural households in the country. As per estimates provided by the India Bullion and Jewellers Association (IBJA), the overall yearly gold demand is likely to drop by almost 10% in 2015, mainly because rural demand constitutes more than 60% of the total gold demand in the country.

Meantime, retails stores across the country have reported tepid sales towards end-August. There is no significant buying interest among customers, jewellers noted. At the same time, the recent surge in gold prices has forced many customers to sell part of their gold holdings. Also, importing agencies are believed to have imported huge quantities of gold in anticipation of huge price crash during July. However, dealers are reportedly holding huge stock levels, since the demand remained low during the month.

Falling domestic gold demand situation is feared to lead to further discounts to gold prices.