India, one of the two largest gold consumers in the world, is in the middle a festival season. This coupled with the wedding season in winter will keep the retail demand quite steady, even when the global investors tend to shuffle investment in the US financial markets with collateral impact the financial markets of the emerging economies, the ASSOCHAM study said.
It said though there is a shuffling of global assets with bias against gold, the yellow metal will not lose its safe haven appeal in the backdrop of geo-political upheavals in different parts of the world- ISIS spread in Iraq, Syria with attendant risks in the Middle East, impact of western sanctions on Russia because of its intervention in Ukraine and the latest being the pro-democracy unrest in Hong Kong.
According to the paper, though gold is losing ground in the international market with prices falling even below USD 1200 per troy ounce, the impact on Indian market will be somewhat neutralised by the commensurate strength in the US dollar which is on the rise against all international currencies, including Euro, Pound Sterling and Yen.
And then , we do not think the government is going to dilute its stiff customs policy on gold imports as it looks determined to see further reduction in the twin deficits on current account and the fiscal gap, ASSOCHAM President Mr Rana Kapoor, who is also a noted banker said.
The dollar is expected to remain steady with upward bias against rupee as well ensuring that on conversion, the gold prices do not slip much even if the international demand declines.
About 60 per cent of the world gold consumption takes place in India and China put together and both these economies are managing to do well despite some hiccups in the Chinese economy.
The paper said the festive season with Dusshera, Durga Pooja, Diwali and then going up the Christmas and New Year will induce the Indian retail customers and even investors to buy gold.
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Another factor which is likely to improve demand is the current levels of prices which are considered quite attractive, there has been a sharp correction of about 20 per cent from upward of Rs 32,000 per 10 grams to Rs 26,800-900 in the last two years. While the retail investor is looking back to the stock market, the gold prices at present level too look attractive. This price level will surely generate demand, the ASSOCHAM paper pointed out.
The ASSOCHAM paper also noted the positive impact the continuous fall in Brent crude prices have on gold as the investment being pulled out in oil futures may also find place in the precious metals. The Brent crude is trading well below USD 100 per barrel (around USD 92-95), a sharp fall from the recent peak of USD 110-112 per barrel not too long ago.
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