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H2 2018 likely to witness increased gold demand owing to Good rains and higher crop MSP

The gold sales in the second half of the year are being expected to increase by 25 per cent. Owing to a good rainfall and a higher minimum support (MSP) for summer crops, the gold trade is going to witness a surge compares to the second half of 2017.

Rural India, which holds a key consumption of about 60 per cent gold in the country, is expected to drive the change in the gold market this year as well. Companies like Rajesh Exports, which are amongst the top gold regulators in the world, are expected to see a surge in their sales and revenue. The rural areas account for a total annual gold consumption of 800-850 tonne.

Not only will this help increase sales and revenues, but also be a golden chance for the investors. With an increase in sales, Rajesh Exports share price, Kalyan Jewelers share price, Malabar Gold share price and share prices of other players in the market will also increase.

Commenting on this, Nitin Khandelwal, Chairman, All India Gem and Jewelry Trade Federation, said, “There have been rains across the country, which is good for Kharif (summer) crop production. This also augurs well for the gold trade as we are expecting demand to pick up from August 15. If the crop is not damaged due to excessive rains, then we are expecting a 25 per cent growth in gold demand in the second half of the year compared to the same period last year. Also, higher MSP will help increase the cash in hand among farmers.”

The MSP of 14 crops was increased by the government in the 2018-2019 marketing season. The MSP for seven of these crops has been raised by 20 per cent or more. The demand of gold is soft from the high net worth and agrarian sectors. However, the gold-buying pattern for middle class families, mostly for the weddings, is steady.

The mid-year outlook of 2018 by World Gold Council stated that the first half of the year has been driven by the surge in the value of US dollar, increased investor threshold for headline risk and less demand of physical gold. It also mentioned that the recent pullback in the gold market will support customer demand because lower prices have always increased jewelry buying. For investors, the current price of gold will offer an exciting opportunity to the buyers.

This will give a boost to the overall gold buying, and thereby will be a boon for multiple brands including PP Jewelers, Rajesh Exports Ltd, Kalyan Jewelers and others.

The council also revealed that positive global economic growth, trade wars and their impact on currency will be an aid to the gold market in the second half of 2018.

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