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| Wedding season gold demand to remain weak |
| Dilip Kumar Jha / Mumbai Apr 02, 2009, 00:27 IST |
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Retail jewellers are skeptical about any revival of consumer demand for gold in the upcoming marriage season unless prices of the yellow metal see some correction. With the marriage season beginning April 15, they’ve already closed their purchases as they need at least 45 days to introduce innovative designs.
Going by the imports of gold, the demand has been 30-40 per cent lower in the first quarter of the current calendar year, said Ajay Mitra, managing director (Indian sub-continent), World Gold Council (WGC). Although, recycling of scrap jewellery has increased substantially, it would not be sufficient to bridge the gap, Mitra added.
According to WGC statistics, demand for the yellow metal in India has slumped by nearly 50 per cent to 102.1 tonnes in the first quarter of calendar 2008, compared to 202.2 tonnes in the corresponding quarter of 2007. Even during the peak season of December 2008-February 2009, consumers had postponed their purchases because of high prices.
Therefore, the overall sales of gold and diamond jewellery have declined dramatically during the said period. And what augurs ill for the jewellery market is the fact that the trend is not showing any signs of change. So, the forthcoming wedding season is likely to remain dull this year.
Gold imports by India remained ‘nil’ in February and March this year as against 23 and 21 tonnes respectively in the corresponding months last year, said a retail jeweller at Mumbai’s Zaveri Bazar.
Still, investors remained upbeat with the world’s largest gold exchange-traded fund, the SPDR Gold Trust, hitting a record high of 1,127.44 tonnes on March 29 and sustaining this level the following day.
However, Mitra hoped that, like past years, gold prices would ease ahead of Akshaya Tritiya, celebrated as the festival of gold in South India, to drive the yellow metal demand. Akshaya Tritiya is falling on April 28.
Prices of the precious metal in global markets settled firm above $900 an ounce in the last two months. And the global economic meltdown provided additional strength to dollar against the Indian rupee, thereby increasing gold prices further. Since India’s gold consumption is fulfilled via dollar denominated imports, any decline in rupee makes gold costlier in the domestic market. This translates into gold sustaining above Rs 15,000 per 10 gram in spot and futures markets in India. This prohibitive price may keep consumers away from the yellow metal.
Typically, investors start selling used gold when the metal breaches key barriers and performs above their expectations. And now, gold has broken all key barriers, prompting investors to sell their holdings, said Suresh Hundia, president, the Bombay Bullion Association.
According to Ashok Minawala, chairman, All India Gems & Jewellery Trade Federation, scrap gold sales have risen 20-25 per cent.
On Wednesday, standard gold in Mumbai rose marginally by Rs 25 to close at Rs 15,130 per 10 gm, while pure gold went up by Rs 15 to settle at Rs 15,190 per 10 gm.
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