Indian Gold Sales Surpass Expectations For Akshaya Tritiya – Analysts

(April 22, 2015 - by Kitco News)

According to reports, gold sales in India picked up during the Akshaya Tritiya festival after what was believed to have been a relatively slow start.

Ahead of the festival, jewelry industry experts were looking for gold sales to increase about 20% compared to 2014.

“Several Indian gold traders report that gold demand around the festival, which took place yesterday, was as much as 25% higher than last year,” said commodity analysts from Commerzbank.

The analysts noted that it is not surprising that gold demand was up compared to last year, as government import restrictions were still in place.

According to local media reports, sales were sluggish at the start of the day because of hot weather. Sales picked up later in the afternoon and early evening.

The increase in sales is positive news for the gold market as there was some doubt regarding demand heading into the festival. Not only has the government maintained elevated import fees, making gold more expensive, but analysts from HSBC noted that consumers have less disposable income because of low crop yields.

“Earlier in the month, local merchants expressed caution on demand on Akshaya Tritiya given the poor winter harvest due to erratic weather as it may have put a dent the rural area’s gold appetite. The bulk of India’s gold demand is derived from the rural area from which agriculture plays an important source of income for many farmers,” they said.

HSBC added that with Indian demand still strong, they expect the country to hold on to its title as the world’s largest gold consumer nation.

Alex Thorndike, senior precious metals dealer at MKS, said that strong demand in India caused premiums to rise to $2 over spot overnight. He added that “demand was not as strong as it could have been” because of diminished purchasing power due to of low crop yields.

However, the global gold market has ignored the increase in physical demand for bullion in India, choosing instead to focus on U.S. data and the Federal Reserve eventually raising interest rates later this year.

Akshaya Tritiya is the second busiest day for gold buying. Diwali is the busiest, which will be held Nov. 11 this year.

Gold has been under increased pressure Wednesday after the release of positive housing data from the U.S. The National Association of Realtors (NAR) said that existing home sales increased 6.1% in March, the biggest sales pace in 18 months.

The news caused Comex June gold futures to hit a session low $1,185 an ounce. As of 12:33 p.m. EDT, prices are only slightly off their lows trading at $1,188 an ounce, down more than 1% on the day.