May 3, 2010
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India May gold festival demand seen robust this year

May 3, 2010

By Siddesh Mayenkar

MUMBAI, April 30 (Reuters) - Indian gold refineries are busy again after a long lull as a popular festival next month is likely to see more sales than last year's 45 tonnes with stable prices and higher economic growth boosting consumer confidence.

The Akshaya Tritiya festival, when Hindus believe they can get lasting prosperity by buying precious metals, is the second biggest gold-buying festival after Dhanteras in November in the world's largest gold market.

In addition, this year's Akshaya Tritiya is expected to generate more business as it falls on a Sunday when people could be easily induced into shopping.

Last year the festival fell on a Monday, adding to the gloom of a volatile market that resulted in sales of 45 tonnes, down 8 percent from 2008, according to World Gold Council (WGC) data.

"We are working more this time. Our order book has increased by 25-30 percent compared to last year," said Vivek Jain, owner at S.L. Industries, at his gold refinery, his face glowing from the light of the red-hot crucibles with molten gold.

Analysts said during this Akshaya Tritiya sales could jump by more than 10 percent on a conservative estimate.

"The outlook is upbeat. Looking at the (good) last quarter of 2009 and the first quarter of 2010, I think the momentum should continue for Akshaya Tritiya especially as prices are steady and even the rupee is strong," Ajay Mitra, managing director - India and Middle East said.

"We are definitely looking at higher (sales) figure than last year's."


In January to April this year, gold imports into India were at 126 tonnes, up 74 percent on year, provisional data from the Bombay Bullion Association (BBA) shows.

Demand has revived in India after a dismal performance in 2009 when the worst monsoon in 37 years lowered gold sales with the year recording 339.8 tonnes of gold imports, down 19 percent from 2008.

Traders and retailers said pent up demand from the previous year is also behind the jump in gold sales this year, especially as economic growth has accelerated.

"A big crowd is expected this time due to school vacations," said Princeson Jose, chairman of Prince Jewellery, a retailer with shops in southern Indian states of Tamil Nadu, Karnataka and Kerala.

A wholesaler said stable prices were key to help meet the projected sales for the festival.

"If prices sustain these levels, we might see good Akshaya Tritiya," said Pankaj Kumar Agarwal, director, Lucknow-based Brijwasi Bullions and Jewellers.

Gold prices in India touched their highest level on December 3 at 18,294 rupees ($412.5) per 10 grams, tracking bullish overseas markets where investors bought gold amid a weakening dollar.

This year, a stronger rupee, which is forecast to be at 43.53 against a dollar by March 2011, is keeping gold prices in a band of 16,000 rupees and 17,000 rupees.

But any sudden volatility in prices could hurt consumer sentiment. "If there is a sudden spike in prices our sales will get affected very badly. Consumers will end up buying 1 gram or 2 grams instead of 5 grams," said Jose. ($1=44.35 rupees) (Editing by Surojit Gupta)

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