As farmers are spending more on seeds, agrochemicals and other farm activities for the ongoing kharif season, rural demand for gold slipped by a quarter in June and the trend is likely to continue in July, industry executives said. Prices of agricultural inputs have gone up this kharif season, putting pressure on the pockets of the agrarian community.

Gold is considered as an important asset class in rural India, which accounts for 60% of the country's total annual gold consumption of 850 tonnes.

"Rural demand is down 25% in June as farmers are busy in sowing kharif crop and buying seeds and other agricultural inputs. July will also be similar. The demand will return in August during Ganesh Chaturthi," said Ashish Pethe, chairman, All India Gem & Jewellery Domestic Council.

Rising agri input costs has pressurised farmers, for whom gold is a major investment. Rajesh Aggarwal, managing director, Insecticide India, said "prices of agrochemicals in the Indian market have gone up this year. This is because of the cost increase for various raw materials and packing materials used by the industry."

Similarly, imported raw materials have become dearer due to global conditions and currency fluctuations. These are essential raw materials for the manufacturing of technical grade products. This again exerts a direct pressure on the prices of formulations or finished agrochemicals like herbicides followed by fungicides majorly used in crops like paddy, cotton, maize, soybean and pulses Aggarwal added.

Gold has stabilised in the range of ₹50,500 to ₹51,000 per 10 gm which could lead to purchases going up.

Ahammed MP, chairman, Malabar Gold & Diamonds said: "A good rainy season has a positive impact on the farm sector. As for the common man, gold is a wearable investment. Hence, we see a rise in gold purchases in the coming quarter. It is also the wedding season, and many NRIs from Gulf countries come home during this time, hence the demand for gold goes up."

Courtesy: ET