UNITED STATES April 15 2016 11:45 AM    

MUMBAI (Scrap Register): Early  forecasts are for an improved monsoon season in India, which should bode well  for gold, said HSBC. The physical market in the country is “gradually returning  to life” after a long strike by jewelers protesting government tax policies, the  bank added.

As the market returns to normal, factors such as income will  determine gold demand in the country. This is where the monsoon comes into play,  HSBC explained. “The majority of gold in India is bought in the rural sector,  where incomes are determined by the harvest, which in turn is heavily related to  the monsoon,” analysts at HSBC noted.

“The better the monsoon, the  greater the harvest, which boosts agricultural income and helps support the  demand for gold.” Last year’s monsoon was not good and gold demand was sluggish,  the bank continues. However, for this year, the India Meteorological Department  is forecasting that rainfall from June is seen at 106% of the 50-year average as  El Nino weakens, HSBC pointed out.

“This has already stimulated planting  preparations, according to the Ministry for Agriculture,” HSBC added. “A good  monsoon and a good harvest could aid Indian gold demand.”