Dollar weakness and safe-haven pull abroad lead to buyers holding their orders.
Gold and silver are trading at a marginal discount in comparison to the dollar price at the famous Zaveri Bazar here due to a sudden spurt in global prices. Gold closed at Rs 19,505 per 10g after hitting a high of Rs 19,700 in spot sales here. Silver closed at Rs 35,175 a kg on Wednesday as against Rs 34,245 a kg on Tuesday.
“Retail buyers are queuing up to book profit. So, old orders are being squared off and new ones are drying up. Generally, buyers wait for fresh orders in case prices rise all of a sudden,” said Prithviraj Kothari, director of Riddhi Siddhi Bullion Ltd, one of the largest gold traders in India.
The dollar’s weakness was unlikely to benefit Indian traders as the Reserve Bank of India did not allow transnational arbitrage, said Kothari.
Surprisingly, scrap sales have not risen much. Experts give two reasons. First, consumers perhaps were using existing jewellery in the festival season. Second, consumers are waiting for prices to hit Rs 20,000 per 10g.
Global surge
Gold rose nearly two per cent to set a new record at Rs 19,700 per 10g here, from yesterday’s close of Rs 19,315 per 10g. In London, spot gold rallied to a new record, just below $1,350 an oz, as anticipation of further easing by the US Federal Reserve eroded investor confidence in currencies and renewed the metal’s safe-haven appeal. Traders believe the Fed may ease policy to stimulate economic growth, which may create fresh pressure on the dollar, leading to a rise in investment demand for gold. The dollar on Wednesday rose marginally against the rupee in early morning trade.
“Both gold and silver are selling at under-costing (discount) . Although the amount is marginal, Rs 15-25 per 10g for gold and Rs 150-200 a kg for silver, a discount during the peak demand season is amazing,” said Suresh Hundia, president of the Bombay Bullion Association.
Despite the consistent rise in prices of both these metals for the past two years, the appetite of Indian consumers has remained unaffected. Gold has risen 26 per cent and silver by 22 per cent since Diwali last year.
“Today, gold demand has suddenly fallen. But buyers are holding orders in anticipation of a correction. If the price rise continues, the festival season will be a flop. But buyers will return if prices stabilise at the current level,” said Jitendra Jain, partner of Jugraj Kantilal & Co, a Mumbai-based jewellery retailer.
On MCX, gold futures for delivery in December rose 0.3 per cent to Rs 19,583 per 10g in early evening trade, while silver contracts for delivery in December moved up by 0.54 per cent to Rs 34,286 per kg.
Looking at the affinity of Indian consumers to gold, it was unlikely the yellow metal’s imports would decline from the estimated 400 tonnes this year as against 343 tonnes in 2009, said a trader.
