Gold News

Indian Monsoon Begins, Critical to Gold Investment Demand

The INDIAN MONSOON season has finally began after what local press call a "dull" start, and it could have a significant impact on Gold Investment and jewelry demand in the world's #1 market, according to analysts.

According to the Associated Chambers of Commerce and Industry of India, a good monsoon means a rise in Gold Investment and jewelry demand after the harvest. Rainfall ensures healthy crops in India, says AssoCham, which in turn ensures a healthy environment for Gold Investment.

However, the contrary is also true, and "If for some reason the monsoon is below normal, then the gold demand will be no more than 600 tonnes this year" – down by 40% from 2011 levels – says Prithviraj Kothari, president of the Bombay Bullion Association.

"More than half of [India's] workforce is employed on farms," explains the Wall Street Journal. "Rural spending – on goods ranging from television sets to gold jewelry – increases when monsoon rainfall is normal, making the rainy season an important part of the broader economy."

The end of May was supposed to be the outset of the monsoon, but "All is well for now," says L.S.Rathore, director general of the Indian Meteorological Department.
The IMD now expects "the rain-bearing clouds to advance vigorously from June 17 and trigger planting of key summer crops," says the Economic Times of India.

During the monsoon and summer month, Gold Investment and jewelry demand is typically quiet. "At this level demand is low," reports Anjani Sinha, CEO of electronic commodity exchange NSEL in Mumbai.

"It will only pick-up when the marriage seasons starts" in September, after the harvest and with the approach of November's Diwali festival.

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Pol Molinas is working as a research assistant at BullionVault, the No.1 gold and silver ownership service for private investors.

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