India being agriculture oriented country, prices of most of the commodities, especially the gold and silver prices in Indian market fluctuate according to the outputs of agriculture industry. Investing in precious metals that guarantees multiples of their money has been the trend since ages in rural as well as urban India. Buying bullions, ornaments of gold and silver has been the easiest way for farmers from rural India to park and multiply their money.
Agriculture industry in India depends highly on monsoon. More than 60% of agricultural land in India is rain-fed and depends on the June-September period. If monsoon arrives on time, the cultivation process in India is bestowed with a good start that up to some extent, guarantees farmers a bountiful agricultural output. When agricultural output is at its best, farmers or agricultural landowners are benefited with handsome financial returns and demand for precious metals like gold, silver increases resulting in a raise in prices on silver and gold. If the rains are ample, transactions in precious metals industry in India increase resulting in augmentation in sales and purchases of precious metals, gold and silver prices. The same are slowed down in cases when there is lack of rain. Such circumstances compel farmers to sale their chunks of precious metals to overcome the losses.
In 2009, India faced a serious drought, the worst in three decades, due to which gold and silver market was hampered during that period. In 2011, monsoon stepped in 2 days earlier than expected that made farmers and agricultural industrialists happy. Also Indian Government is banking on it to overcome the losses caused due to the drought in 2009. But the rain has disappeared since 2 weeks. Many regions, villages in North India have not yet seen a single drop of rain and some areas in Central India also have gone almost dry.
Even though there is no rain since one week or two, the price on gold has not come down as gold is more sought-after precious metal than silver. Even if the rain were below normal, the gold demand will settle around 650 -700 tons this year.
To the contrary, though farmers in India prefer buying silver than gold to park their money, price on silver seems to be declining due to the disappearance of rain. Silver import figures also show a saddening scene of 33% of crash during first quarter of financial year 2011-2012. If the rain continues to be absent till August 2011, gold and silver market in India and the world will see tumbling prices on silver and gold.