India: Gold demand drops; rice exports rise
February 16, 2012

As global political and economic scenes shift, and while the world still has its eyes on Iranian oil, subtle yet significant changes are taking place in other commodity markets as well. According to news reports, China already the worlds largest producer of gold, is expected to usurp the throne from India the erstwhile global consuming leader. While India will slip to second place in consumption of the yellow metal soon, the south Asian nation has already overthrown Thailand and Vietnam to become the worlds largest exporter of rice.  The main premise behind India’s ascension to the largest global exporter to rice is due to its low pricing. Neighboring China remains the worlds largest producer, however doesn’t export as much due to a high domestic demand.

Thailand and Vietnam which have been comfortably perched as world’s top two rice exporters for years saw the balance of trade recently shifting – and not only due to India removing export restrictions in early September. It’s also because the Thai government has been buying rice at artificially high prices since early October to fulfill a pre-election promise to farmers. Thai rice is now at least US$100 per ton costlier than India’s – according to the Wall Street Journal. Thailand exported less than 400,000 tons of rice in January, most of which was fragrant Jasmine rice. Vietnam’s rice exports fell to below 300,000 tons in January, a considerable drop from the monthly average of almost 600,000 tons in 2011. Comparatively, India can easily export around 600,000 tons of rice.

Meanwhile, on the back of its surging population and higher income rates, demand for bullion in China jumped 20 percent to 769.8 metric tons in 2011, while consumption in India declined 7 percent to 933.4 tons, according to a report from the World Gold Council, a producer-funded organization. Jewelry demand in China increased every quarter in 2011 and was the biggest such market worldwide in the second half, it said.

“You’ve effectively seen foreign direct investment dry up in India,” Mr Marcus Grubb, managing director for investment at the WGC, a lobby group for the gold mining industry said. “That feeds down into the economy with slowing growth and less liquidity available. That really impacts the rupee, and gold looks horribly expensive to local consumers.”

On a quarterly basis, China was already the biggest consumer in the three months to Dec. 31, with demand at 190.9 tons compared with India’s 173 tons, the council said.  Chinese investors bought 258.9 tons of gold bars and coins last year, 38 percent more than a year earlier, the council said. Gold jewelry demand gained 13 percent to 510.9 tons, it said.

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