By Venkatachari Jagannathan and Anuradha Shukla, IANS,
Chennai/New Delhi : The prices of gold continued to surge in India, the largest market for the yellow metal in the world, triggered by a virtual halt in imports as also on the back of global cues, with traders finding it a much better avenue for investment than corporate or government paper.
Analysts said Wednesday they expected the uptrend to continue in the short-to-medium term, following demand from some unexpected quarters like investors in bond and equity markets, even though the sale of gold jewellery has fallen.
At the Multi Commodity Exchange of India, gold prices for April 4 delivery hit another high of Rs.15,617 (around $312) per 10 grams during intra-day trading Wednesday, as against the previous day’s close at Rs.15,491.
“The trend for gold prices is bullish in India considering the economic meltdown in the US and also the financial sector problems that have hit equity markets hard,” said K. Shivram, vice president of the World Gold Council (WGC).
“Funds investing in real estate and some other sectors are now investing in gold. There is also good interest in the exchange-traded funds. We expect the trend to continue for some more time,” Shivram told IANS.
The council, which is an organisation promoted and funded by leading global gold mining companies to promote demand for the metal, also said the spurt in prices being witnessed now was not due to any cut in production.
India consumes some 800 tonnes of gold per annum and accounts for 20 percent of the global demand. Some 600 tonnes are used in jewellery, of which 200 tonnes are reprocessed.
“There has been a 15-20 percent drop in jewellery sales. People are basically waiting for the markets to stabilise,” said Ashok Minawala, chairman of the All India Gems and Jewellery Trade Federation, a representative body for the industry.
“There has been a dip in imports but that is not affecting our industry. Our people have huge inventories and that can help us sustain our operations if demand rises,” Minawala told IANS.
“Lots of people are coming to sell their jewellery after gold prices crossed the Rs.15,000 (per 10 grams) mark,” added Devendra Bharadwaj of Mehrasons Jewellers, a leading chain in the capital.
“So far as traditional jewellery is concerned, people have certainly curtailed their budgets. But investors are lining up to buy gold coins and even basic jewellery, as they feel prices can go up to Rs.20,000.”
The World Gold Council said that in the third quarter of this fiscal, the total demand in India was up 84 percent in tonnage terms, led by a strong 107 percent rise in jewellery demand.
But demand for jewellery seems to have since fallen.
“Statistics confirm investors around the world recognise the benefits of holding gold during the time of unprecedented global financial crisis, recession and the spectre of future inflation,” said Aram Shishmanian, chief executive of WGC.
“Gold has again proven its core investment qualities as a store of value, safe haven and portfolio diversifier and this has struck a chord with nervous investors.”