Gold traders stay away on weak monsoon forecasts -
August 3rd, 2012
Indian gold traders stayed on the sidelines as they prepared to face weak rural demand after the weather office forecast a drought which could dent farm incomes and savings.
Physical demand has been subdued so far this year and is expected to remain dull after doubling of import duty to 4 percent. Deficient monsoon rains could further dent gold demand in rural areas, which contribute to 60% of imports.
"No one is buying now, there is pin drop silence... the whole liquidity cycle will dry up in the short-term, hampering our business," said Kumar Jain, vice-president of Mumbai Jewellers Association.
The federal government signalled the first drought in three years on Thursday, which could squeeze crop yields and farmers' income.
The festival season starts in August in India, the world's biggest gold buyer in 2011 and continues till November.
The most-active gold for October delivery on the Multi Commodity Exchange (MCX) was 0.23 percent lower at 29,946 rupees per 10 grams at 1104 GMT.
Silver futures also traded flat following the yellow metal.
Silver for September delivery was 0.09 percent higher at 52,856 rupees per kg.