Monsoon failure hits India gold demand

Mumbai - The first back-to-back shortfall in India's monsoon rain in three decades is hurting gold demand with sales of pendants to bracelets and necklaces dwindling during the busiest quarter of the year.

A deluge that's marooned Chennai, a key market, is only adding to the woes.
Bullion consumption is seen as low as 200 metric tonnes in the fourth quarter, P.R. Somasundaram, managing director for the World Gold Council in India, said in an interview in Mumbai. That compares with demand of 268.1 tonnes in the third quarter and 202 tonnes during the fourth quarter of 2014, council data showed.
Large parts of India, which vies with China as the biggest gold consumer in the world, received below-average rain this year as an El Nino, ranked among the strongest since 1950, intensified. That hurt crops from rice to cotton and sugar cane, leaving less money in the hands of farmers in rural areas, which account for about 60 per cent of annual demand. The worst deluge in a century in India's southern state of Tamil Nadu is now threatening to further hurt demand, Somasundaram said.
"The rural demand doesn't appear to have been good because of poor rains," Somasundaram said. "What has happened over the last month in Chennai, which is a core market, is a huge loss as it is going to cut into the expenditure of people."
The deluge paralysed Chennai, closing offices, automobile factories and the airport. The city suffered a record 1,218.6 millimetres (48 inches) of precipitation in November, according to forecaster Skymet.
The south Indian states of Tamil Nadu, Kerala, Andhra Pradesh and Karnataka account for about 40 per cent of India's demand, Somasundaram said, citing industry estimates. "These states are very high in the intensity of demand, so when any such event happens that could cut income of people, it has to be factored in." While India's total consumption in 2015 estimated at 850 tonnes to 950 tonnes will remain above last year's 811 tonnes, purchases will be lower than the 900 tonnes to 1,000 tonnes forecast by the council in August, Somasundaram said. Demand usually peaks in the final quarter in India with gifting during festivals and culminates with the start of the wedding season in November.
Imports dropped 22 per cent to 655 tonnes in the eight months through November though shipments more than doubled in November to 101 tonnes from October, two finance ministry officials said on Wednesday, asking not to be identified citing government rules.
Bullion for immediate delivery slumped to a more than five- year low of $1,046.44 an ounce on Thursday after comments from the Federal Reserve Chair Janet Yellen on Wednesday signalled that US interest rates will rise gradually after a widely-anticipated liftoff this month. Futures in Mumbai, down 6.6 per cent this year, traded 0.4 per cent lower at Rs24,947 per 10 grammes by 4:33pm local time.

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