High Prices Take The Sheen Off Gold

Mumbai: With gold prices nearing Rs 1,000 a gm, it is beginning to put off buyers as well as investors. While physical gold purchases are being made only for occasions such as marriage or functions, investors find the stock markets yielding more than the yellow metal.

On Friday, standard gold closed at Rs 9,950 a gm against Rs 8,905 on September 1.

“According to market estimates, the average gold demand per day is one tonne. It has fallen to 700-750 kg in September. The primary reason has been the price volatility and lower realisation in rural markets,” said Sahil Kapoor, research analyst of Kotak Commodity Services Ltd (KCSL).

Optimistic

“Wholesale demand for gold has gone down this Dasara due to high prices. We expect demand to pick up during Diwali but it will depend on the prices,” said Suresh Hundia, President, Bombay Bullion Association.

“People seem to buying only because they have to for the occasion. Otherwise, there is lukewarm interest. There is practically no investment demand,” said Ashok Kumar Mundra, Secretary of the Madras Jewellers and Diamond association.

According to analysts, booming stocks have also made gold investments less attractive. “While Sensex has gained about 3,800 points since September 1, gold prices have increased by around Rs 1,000 per 10 gm only. This is a clear indicator of how attractive the stock market has become vis-À-vis the bullion market,” an analyst said.

The Sensex closed at 19,105 points against 15,318 during the period.

During the last 12 months, the yellow metal has gained Rs 1,215 per 10 gm.

According to Kotak Commodity Services Ltd (KSCL), demand for gold in the country has fallen 25-30 per cent in the last few weeks.

A consolation for the domestic gold has been that the rupee’s gain has kept the prices on a leash at a time when global prices are at 28-year high of $780.50 a troy ounce, up 31 per cent year on year.

Jewellery demand

Rise in gold prices have also impacted jewellery demand. “Apart from high gold prices, jewellery demand was low in September at in the Hindu calendar it was the inauspicious Shravan month,” said Kiran Dikshit, Manager, Tribhovandas Bhimji Zaveri.

Sensing an opportunity many enterprising customers have preferred to exchange their old jewellery for new ones, he added.