The focus of the local bullion trading community now shifts to the international markets, with key meetings of the European central banks to be held in the next two months to determine their gold reserves. This is expected to have an impact on the international as well as the domestic gold prices.
During talks relating to the single euro currency discussions the percentage of gold to be kept as reserves with these banks under the new dispensation will also be held.
While meetings are set to take place in July and August-end to finalise issues, there is talk of maintaining up to 30 per cent of reserves in gold form, which would result in the firming up of gold prices internationally.
"We will watch with much interest. If the reserves have to increase, it would indicate a bullish trend. Some countries at this stage do not have those levels of reserves, while some others do. Since there have been sales by some central banks last year, there may have to be a mop-up to maintain specific levels,'' said Kushal Thacker, a leading dealer at the Bombay Bullion Exchange.
It may mean the firming up of gold prices by up to $25 per troy ounce. Currently, international gold prices rule around $ 322.10. Domestic gold prices move in tandem with the international prices and are currently ruling at Rs 4265 per 10 gm.
According to information available, the European central banks sold an estimated 390 tonnes of gold in 1997. Though this is a lower level than in 1992-93, it had a substantial impact on depressing gold prices further.
Domestic gold prices are likely to move in a narrow range in the near future as its supplies are on increase mainly due to Gold Bond redemptions. This gold has started entering in the market which has weakened the sentiment.
M L Damani, president of the Bombay Bullion Association, said that during the current lean season, the demand will be subdued against scattered supply. "The supply of gold remains mostly from abroad and very negligible from the lcoal sources. Whenever the prices of this yellow metal remains steady or at lower side in the international market, the inflow to the local market improves. We are now eyeing on the new season which is likely to commence in September-October,'' he said.
According to Bhayabhai Sanghavi, a local bullion dealer, this is the off-season in the bullion market. "Hence, the demand for gold has remained very sluggish.
The arrivals of gold from abroad are very scattered because of the devaluation of the rupee. The landed cost of gold biscuit works out to be around Rs 50,700 per piece against its present market price of Rs 50,400. This trend is likely to continue till August-end,'' he said.
India is the largest consumer of gold in the world with a gold demand of 737 tonnes for the year 1997, according to the World Gold Council.
