Gold demand slumps in India as prices skyrocket

January 27, 2009

Commodity Online
NEW DELHI: Even as gold prices skyrocketed to above Rupees 14,000 in Indian spot and futures market, consumer demand for gold slumped on Tuesday. There was a decline in the sale of gold in several Indian cities and towns. India has the largest number of gold jewellery shops in the world.

Jewelers and traders said that high prices of gold have are preventing buyers of the yellow metal to shop. “Only serious buyers like families that are going for weddings and ceremonies are coming to the shop these days. People do not want to buy gold at this huge rate of above Rupees 14,000 per ten grams,” Rupesh Shah, a gold trader at Delhi’s bustling Chandni Chawk gold market told Commodity Online.

India gold prices on Tuesday rose by another Rs 40 to hit a record high of Rs 14,140 per 10 gram in New Delhi and Mumbai markets on increased buying by stockists. Standard gold and ornaments rose by Rs 40 each to close at a new high of Rs 14,140 and Rs 13,990 per 10 gram respectively, while sovereign held steady at Rs 11,000 per piece of 8 gram.

Silver prices were up by Rs 200 to Rs 19,200 per kg, while weekly-based delivery by Rs 220 to Rs 19,470 per kg. Silver coins, however, ruled flat at Rs 27,500 for buying and Rs 27,600 for selling of 100 pieces.

Shah said local gold demand has dried up thanks to the rising prices in the yellow metal. “It is for the first time that gold has touched such a high price in India. Serious investors in gold will wait for the prices to come below Rupees 13,000 per ten grams for any more purchases,” Shah said adding: “People are now selling gold and not buying.”

Gold price in India, the largest consumer and importer of the yellow metal in the world, is zooming these days thanks to the spurt in the global price that has gone past $900.

In India’s commodity bourses, the gold traded above Rupees 14,000-levels. On the Multi Commodity Exchange (MCX), gold for February 05 contract was trading at Rupees 14014 while the August 05 went up to Rs 14160. “Gold is doing well in India’s futures market as it is felt that the price of the yellow metal can now only go up thanks to the global economic downturn,” said Rakesh Mathur, a bullion analyst based in Mumbai.

On the National Commodity and Derivatives Exchange (NCDEX), gold for the January 30 contract was trading at Rupees 14247.

Although gold prices in December in India have been range bound between Rs 12,500 to Rs 13,500 per 10 grams and not very erratic, they have been very fluctuating. A rally has hence been absent for long as prices climb and are soon pulled down by lackluster demand.

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