Gold demand declines by half in 3 days

Gold demand in Mumbai has declined by 50 per cent during the last three days to approximately 500 kg compared with one tonne during the normal season.

Suresh Hundia, president of the Bombay Bullion Association (BBA), attributes three basic reasons for the subdued demand such as the holiday mood in the market, absence of traders and the ongoing "extra month".

Elaborating the current sentiment, Hundia said, "Almost all major traders have gone out on long holidays and, therefore, trading activities have been reportedly very low in Mumbai." Secondly, traders living outside Mumbai are hardly coming to the city for purchases.

Talking about the ongoing inauspicious one-month period, Hundia said that Hindus do not buy any precious and durable commodities, including gold and silver, during this extended period which started on May 17. According to Hindu mythology, this extended month-long period comes once in four years which bars Hindus from by buying gold and silver.

Apparently, the expected arrival of monsoon has also contributed to the existing worries of traders. The yellow metal trade during the monsoon period, between June to September, declines dramatically as attention is focused on other areas of concern including agriculture.

Gold demand is likely to resume in the first week of June, when traders are expected to come back, and pick up gradually towards the end of the inauspicious period ending on June 15. Around this time, the wedding season would start, driving demand and compensating the current decline, a trader said.

The world's largest consumer of yellow metal witnessed a record quarterly growth of 50 per cent to 211 tonnes in the first quarter of the calendar year compared with 140.7 tonnes in the same period last year, thanks to higher jewellery and retail investment in the wake of sustainable global prices, according to a report by Gold Fields Minerals Services (GFMS) of the World Gold Council (WGC).