Gold sales remained almost unchanged on Ashadhi Beej, an auspicious occasion to buy the yellow metal, as consumers continued to abstain from fresh buying on higher prices.
Standard gold prices surged a marginal Rs 20 here to trade at Rs 18,410 per 10 gm as the metal strengthened its status as a safe haven investment in the global financial crisis. In New Delhi, however, gold of 99.9 per cent and 99.5 per cent purity fell by Rs 50 each to Rs 18,650 per 10 gm and Rs 18,550 per 10 gm, respectively.
Gold rose nearly 2 per cent to $1,217.60 an ounce in Europe on Tuesday after a ratings agency downgrade of Portugal knocked the euro, boosting the metal's appeal as a hedge against currency market volatility.
The sentiment was supported by the news that Greece, the most indebted of euro zone economies in terms of its borrowing relative to economic output, tapped the markets for the first time since its euro 110 billion bailout in May from its 15 partners in the eurozone and the International Monetary Fund.
However, some of the optimism in the markets was dampened by Moody’s Investor Services’ downgrade of Portugal. The agency cut its rating on Portugal by two notches to A1 amid concerns over the country’s financial strength over the medium term in light of waning growth prospects.
The latest report by the World Gold Council (WGC) indicated total official sector gold holdings stood at 30,462.8 tonnes in a report dated June 2010, up 0.9 per cent from 30,190.1 tonnes three months ago. This means, traders are still looking at gold as an investment option with greater optimism for price rise.
In India, Ashadhi Beej is celebrated in Orissa and a part of Gujarat and is little known among major gold buying centres like the south and the west. Therefore, consumers were not enthuastic about the fresh buying, said Ketan Shroff of Pushapak Bullions, a Mumbai-based bullion trader. Meanwhile, gold retailers are witnessing huge scrap recovery at the current high prices. Virgin gold sales have virtually come to standstill.
“Consumers are waiting for a price correction. Buyers will not turn to the market until prices is corrected to Rs 17,500 per 10 gm level,” said Jitendra Jain, Partner of Jugraj Kantilal & Co., a Mumbai-based jewellery retailer.
Today, gold retailer collect scrap gold to melt in the refinery and sale again to consumers. Therefore, a scrap bar is re-melted and sold in bar form again, said Shroff.
“Commonly, farmers sell their gold holding to buy higher yielding seeds which is generally sold at a premium. Hence, they sell their gold holding during sowing season of July-August and buy the yellow metal at the time of crop harvesting. This is a normal trend with gold sales in India,” said Bhargav Vaidya, an analyst with B N Vaidya & Associates, a Mumbai-based research firm.
During monsoon season, the sale of pure gold declines due to the lack of any reason for buying. Since, the wedding and the festive seasons are not celebrated during monsoon period, consumers prefer to abstain from fresh orders. Instead, availability of scrap gold increases sharply due to household sale.
Normally, 30 per cent of gold is made available through recycling in India, the world’s largest consumer. But, skyrocketing prices increase old gold’s availability. Global consultancy firm GFMS Ltd estimated India’s total gold demand at 432 tonnes in 2009.
