All Eyes On Gold Price This Diwali, Gold Prices

With the Diwali festival, India’s gold traders are busy preparing for hige rise in demand for the yellow metal. Traders across the country from Kolkata to Kochi are now adding to their stocks as they see a big boom in sales in the coming weeks.

Inspite of the high prices, the traders are buying gold in a big way. Demand is still there for gold, traders have been buying dollars in the market as well. Gold is a dollar-quoted asset, and India being the world’s largest consumer of gold, imports majority of its requirement, the rupee plays an important role in determining its landed cost.

State-run Indian trader MMTC Ltd expects to import more than 200 tonnes of gold in the current fiscal year to March 2011.

However, the sharp run-up in the price of gold has taken gold jewellery beyond common man’s reach in India.

Gold sales typically peak in the October-November period due to buying for the Navratri, Dussehra, and Diwali festivals.

However, this year, jewellery demand is down 25-30%. Gold prices are above Rs 20,000 per 10 gram in India now. The rise in gold prices has deterred customers, and they are shifting to other investment avenues. According to analysts, a revival in demand can be seen if prices stabilise at Rs19,000-19,200 per 10 gram.

Though gold consumption in cities has fallen, industry officials are optimistic about rural demand as a bumper crop output due to good monsoon, better price realisation and appreciation in land value will increase consumption of physical gold. Generally, around 60% of physical gold purchases are from smaller towns and villages.

However, sales of non-gold jewellery and non-jewellery gold, which comprises of gold coins and bars, has risen compared with the sale of gold jewellery on the whole.



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