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Rupee, Euro Crisis Hits Gold Demand In India
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Premiums stayed steady in Hong Kong, Tokyo and Singapore.
Traders in India, Asia's third-largest economy, are also waiting for the monsoon to pick up, which could boost the income of farmers, who buy more than half of India's gold.
"If the monsoon turns weak, jewellery demand will go further down ... we are now dependent on gods rather than government," said Haresh Acharya, head of bullion desk of Parker Bullion in western Indian city of Ahmedabad.
The fall in the rupee, which hit a record low last week, has sent Indian gold prices soaring despite the weak global trend, limiting imports. The rupee is important in determining the landed cost of the dollar-quoted yellow metal.
The Indian government doubled import duty on gold to 4 per cent in March in a bid to curb its bloated current account deficit.
"Business is zero... the situation is very bad as there are no hopes of appreciation in the rupee," said Acharya.
Gold was flat at $1,571.50 by 0548 GMT, after falling on Tuesday on worries that a global economic slowdown triggered by a worsening debt crisis in Europe could prompt investors to turn to the relative safety of the U.S. dollar.
"We have seen very slow demand. They are worried about the debt crisis in Europe, everybody is trying to keep more cash on hand," said Dick Poon, manager, Heraeus Metals in Hong Kong, adding the depreciating currency is also an issue for traders.
Traders are eyeing yet another European summit slated for Thursday-Friday, the 20th such meeting called to try to resolve the spreading crisis, which has sent gold prices to a record high of about $1,920 an ounce as buyers seek safe havens.
Premiums on gold bars in Hong Kong stood around 70 cents to a dollar an ounce above London prices, steady from a week earlier. Premiums in Tokyo were also steady at 50 cents, while in Singapore, premiums were flat at 70-80 cents.
There was a lack of enthusiasm among traders in Indonesia before the traditional buying period of Ramadan holidays due to depreciation in the local currency, dealers said.
"Despite Ramadan, buying from Indonesia is not high compared to previous years as their local currency is weak," said a Singapore-based dealer, referring the Muslim fasting month that starts in July, when gift giving is at its peak.
China's jewellery market also entered the summer lull, with no major festival in sight until early October.
Latest rainfall figures out from India suggest a below average rainfall so far from June and another weekly update is expected on Thursday. The Indian weather office is still predicting an average monsoon.
Buying from rural areas accounts for about 60 per cent of gold imports, and farmers depend on monsoon rains for better yields, production and profits.
Farmers often invest in gold due to a lack of banking facilities in rural areas.