Indian monsoon rains are favorable for gold

India has absorbed 18% more rain in June than the average in other years. The monsoon covered the entire country almost two weeks earlier than usual, according to sources from the Indian Meteorological Department. 

Monsoons generate around 70% of India’s annual rainfall. They are the country’s lifeblood, stimulating agricultural production and driving rural spending on products ranging from gold to cars, motorcycles, and refrigerators, especially precious metals.

India is facing an excellent start of the monsoon season

According to official information from the Indian Meteorological Department, there was 18% more monsoon rain in the country during the past month of June. They affected the entire country, starting two weeks earlier than usual. The soybean, pulp, and cotton-growing regions in central and western India recorded 31% more rainfall. Rice, coffee, rubber, and tea in southern India recorded 8% more rain.

There is no doubt that this has been an excellent start to the monsoon season. Farmers planted crops over 31.56 million hectares as of June 26.

Cotton planting increased by 165%, while rice planting rose by 35% during that period.

India is the world’s largest rice exporter and the largest cotton producer. An increase in production could lead to higher exports of both products.

Soybean plantations have increased 525% from a year ago, which could help reduce imports of the commodity.

Future monsoons

India is likely to see above-average monsoon rains even in July, a crucial month for planting summer crops, an IMD official said.

According to IMD, India is likely to see above-average monsoon rains for the second consecutive year in 2020. This then raised hopes for increased agricultural production in an economy stumbling from the impact of the coronavirus.

Increased production will equate to more significant business opportunities and money inflow among farmers, who make up the majority of  India’s population. The fiscal entry will then hopefully translate into higher gold consumption as savings, investment, and gifts to the temples and to brides who will marry around September/October.

After China, India is the largest consumer of gold. The country consumes around 849 metric tons of the precious metal every year.

According to the World Gold Council, Indian households are the world’s largest holders of the metal. They may have saved up to 25,000 tonnes of gold. It is estimated that, in 2030, the consumption of the precious metal and jewelry by the country’s middle class will increase by 9%, compared to this year.