Farmers' sale of gold seen to scrimp imports

Farmers' sale of gold seen to scrimp imports

Farmers usually sell some gold and silver ornaments ahead of the kharif sowing season to pay for seeds and fertilisers, and the current surge in gold prices has provided an added incentive.

This could lead to a drop in imports of gold bars as the scrap would be melted and made into bars for domestic consumption, traders said. India imported 28.6 tonnes of the yellow metal last May.

“I plan to sell two tolas of gold and some three tolas of silver before I start sowing maize... I require them to buy fertilisers and other requirements,” Laxmibai Pandurang Karanure, a farmer from Chikkodi in Belgaum district said.

Precious metals form a large part of savings in rural India, where more than 60 per cent of the population has limited access to banking facilities. Indian households are said to house 20,000 tonnes of the yellow metal, mainly in the form of jewellery, which they prefer selling in bouts in case of a price rise or to tide over bad times.
A sharp rise in prices of agriculture commodities has prompted farmers to increase yields by using quality seeds and timely use of fertilisers. For this, they will be generating cash by selling precious metals, traders said.

Hike in prices
“Now would be the time that farmers will start selling part of their gold as prices have also risen,” Bombay Bullion Association Director Prithviraj Kothari said.Gold prices in India are within striking distance of their all-time high on increased safe-haven appeal of the yellow metal amid the debt crisis in the euro zone.
MCX gold for June delivery was trading at Rs 18,325 per 10 grams on Tuesday, after hitting a record high of Rs 18,424 on May 17. The yellow metal has gained about 10 per cent on year-to-date basis.
However, the increased supply will not impact domestic prices, as local prices tend to follow international prices and also the rupee.

Imports rise 71%
Gold imports rose by 71 per cent to 34.2 tonne during April 2010 compared to year-ago period as prices declined to Rs 16,262 against record Rs 18,500 level in December 2009, reports PTI. Shipments during April 2009 stood at 20 tonne due to less demand according to Bombay Bullion Association.