Rising gold prices expected to hit demand in India

Monday, 23 August 2004, 07:00 Hrs
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NEW DELHI: With a soaring demand for gold globally pushing up prices, sale of the yellow metal in India could be hit in the upcoming festive season.

Led by fears of global economy and volatility in crude oil prices, gold is witnessing greater investor demand around the world.

Bullion prices scaled a high of $415 per ounce Friday before settling down at $405 per ounce.

"The global market is unpredictable at present. While the prices seem to have cooled down after rising to $415 per ounce, it could well rise again in the days ahead due to increasing global investor perception of gold being a safer investment," said Suresh Hundia, president of the Bombay Bullion Association.

"The bullion prices had risen much higher in January this year as also in the early part of last year. While the demand will remain, the high prices may halve the expected growth during the festive season ahead," Hundia told IANS.

While in Mumbai, the gold prices is 6,250 per 10 grams, in the capital it has risen to 6,150 per 10 grams.

"If the present trend continues, the price of gold may well scale past 6,500 per 10 grams," said Rakesh Saraf, general secretary of the Karol Bagh Jewellers Association.

"At higher prices the demand slows down. Already the demand is not as much as expected with the festive season expected to start by end of month," he added.

With the rupee having depreciated against dollar in the last few months, the bullion traders see a greater impact of higher international gold prices on the domestic market this time around.

The largest consumer of gold, India has been witnessing a growth in imports despite the metal witnessing volatile swings in recent years.

India's gold imports rose 30.7 percent in April-June this fiscal with 202.55 tonnes as compared to 154.92 tonnes in the first quarter of the previous year, according to the commerce ministry data.

Global gold jewellery demand was eight percent higher during the April-June quarter at 664 tonnes, even though the gold price increased by 13 percent, according to a World Gold Council report.

During fiscal 2003-04, India's gold imports were worth $6 billion, up from about $3.7 billion in the previous year, according to the commerce ministry.

The rise has been attributed to the sharp rise in rural demand on the back of a good agriculture year, said market experts.

"In April-June, there was good demand from rural areas after a good harvest and improved prices for commodities. This time round it is hard to say how the consumers would react to the rise in prices," said Saraf.

The rise in crude prices, uncertainty on global economic front, the upcoming elections in the US are among factors attributed by the bullion market experts for the current volatility in prices.

"All these factors are working to create a demand among investors who see a safe haven in gold and silver, with the expectation of a further rise in prices. In India, however the volatility would affect demand ahead of the marriage and festive season," said Tara Chand Jalan, secretary of the Delhi Bullion Merchants Association.

At the same time, "if the prices stabilise for seven consecutive days, there would be a pick up in demand", said Shri Krishan Goyal, general secretary of the Delhi Bullion Merchants Association.

Source: IANS
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