Rains f'cast seen boosting gold, silver imports

MUMBAI: Demand for gold in India, the largest consumer, is expected to rise as India's weather office has forecast normal monsoon rains, which would boost purchasing power in rural India, home to two-thirds of the population.

"Monsoon is crucial for gold demand... Ours is a farm-based economy good harvest helps gold buying in rural areas," said Suresh Hundia, President, Bombay Bullion Association (BBA).

India is estimated to have imported 339.8 tonnes of gold last year, data from the Bombay Bullion Association (BBA) showed, while imports for the first three months to March have risen 30 percent on year to 90.5 tonnes. International gold was trading at $1,137.45/1,138.25 an ounce as against the previous close of $1,140.45/1,142.45. Silver imports, which were placed at about 1,300 tonnes last year, are also seen jumping.

"Silver demand will benefit as a good monsoon will boost sentiment in the rural areas...," said Hundia. Silver was trading at $17.93/17.99 an ounce as against the previous close of $17.95/18.03. Most Indians live in rural areas, where farming is the primary source of income and gold is a major form of investment due to lack of banking facilities. India's weather office expects normal rainfall in the June-September monsoon season, raising hopes of a rebound in farm output after last year's severe drought.

Rainfall is likely to be 98 percent of the long-term average, said the weather office, whose forecast is closely watched by commodities and financial markets as well as the government, which is battling to rein in inflation against a backdrop of intense protests over rising food prices.