Gold drop fuels jewellery sales

The sharp fall in spot gold prices since last week has boosted jewellery sales in Mumbai and other cities across the country with retail buyers increasing their purchases of yellow metal, dealers said.

"Demand has shot up tremendously. Across Mumbai on an average, 2-3 tonne of gold was sold (last week) compared with barely 200 kg a month back (in August)," Mahendra Bafna, a bullion dealer in city's Zaveri Bazaar, said.

Domestic spot prices fell below Rs 9,000 per 10 gm mark last week tracking the weakness in global markets.

Overseas gold has fallen over 9.5 per cent since September 11 and 20 per cent since May 12, when the rates hit a 26-year high of $730, when investors infused huge funds into precious metals to hedge against a slew of global factors such as U.S.-Iran relations, high crude oil prices, and the US dollar's instability.

Fall in overseas prices was triggered owing to a widespread liquidation by hedge funds against the backdrop of weak crude oil prices. The yellow metal often moves in tandem with energy rates. Weak crude oil prices erode gold's appeal as an anti-inflationary hedge.

Crude oil prices hovered around $63 a barrel, its lowest in five-and-a-half months on rising inventories of heating oil and trimming of demand forecasts by Oil Producing Exporting Countries and International Energy Agency.

Last week, in Mumbai, spot gold prices of both .999 and .995 purities have lost more 2.8 per cent. "Definitely, the fall in prices has led people to make maximum use of it.They are simply taking advantage of this opportunity," said Reema Pahuja, proprietor of city-based Tikamdas Motiram & Sons.

The retail outlet last week registered a 20 per cent rise in sales. Dealers in the city expect demand to remain firm in the coming days due to the series of festivals staring with the nine-day Navrathri festival starting Saturday. However, they said that any abnormal fluctuation in rates could deter buyers.

"If prices stabilise and continue to move in the current range, then we could see a buoyant demand up to Diwali and further," Bafna said. Normally, the third and fourth quarter of the year witness maximum demand in India, as most of the weddings, Diwali and other festivals are scheduled.

Today, spot pure gold in Mumbai opened at Rs 8,840 per 10 gm, down Rs 205 since last Monday. Spot standard gold opened at Rs 8,790 per 10 gm versus Rs 8,995 per 10 gm last week.

In other cities across the country such as Chennai, Jaipur, Kolkata, and Ahmedabad, demand was buoyant, dealers said. Chennai, one of the main consumers of gold in the country, registered a 50-55 per cent rise in demand, dealers said.

"Since the last one week, we have been getting a lot of enquiries. There has been offtake in both jewellery and coins segment," J. Govind, a senior official at Chennai's Khazana Jewellery, said.