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A welcome correction in gold prices

— FILE PHOTO

GOLD LURE: A worker showing gold biscuits at a precious metals refinery in Mumbai.

MUMBAI: Gold has given investors little to complain about this year with what can be best called a bull run but consumers and end-users had been in a quandary as to when to buy, as gold had been crossing all-time highs.

However, a steep fall in the price of the yellow metal has rekindled hopes of improved sales by gold retailers given that the festive season is on. Gold reacted by almost Rs. 2,300 per 10 gram from the record Rs. 13,435 ($1,032.7 on the LME) it scaled on March 17. It closed last week at Rs. 11,255, a three month low.

Earlier, gold retailers were a worried lot because there were doubts about the offtake at record prices.

But softer prices have raised their hopes as this is now the festive season when gold sales peak and Akshaya Trittiya, the date considered auspicious by Hindus for buying gold falls on May 7.

Bakul Mehta, former chairman, Gem & Jewellery Export Promotion Council (GJEPC), and now convenor, Diamond Panel, GJEPC told The Hindu that “there has been too much of instability in prices and that was driving people away. Although prices are still high but the sentiment to buy on Akshaya Trittiya is still very strong, though there may be lower sales volumes.”

Falling gold prices have buoyed demand and if the trend persists, and price settles around Rs. 11,000 (10 gm), buying is likely to gain momentum. Shivram Kumar, Vice-President, World Gold Council (WGC), felt that the Indian consumer was more mature now and buys during corrections. “There is brisk business and buyers have been waiting for a fall from the record levels.”

“Now the uncertainty has gone and I see gold settling down. I feel that soon gold will settle around Rs. 11,000 (10 gram) or $825 an ounce,” said Mr. Bakul Mehta.

Mehul Choksi, Chairman, Gitanjali Jewels, a large gold and gold jewellery retailer, felt that volumes were affected.

“In the last several months, gold value has gone up significantly but sales volumes have gone up only 4-5 per cent. Things look more stable and there is unlikely to be any drastic price-rise because the U.S. economy is settling down and even oil prices have stabilised. Gold is likely to remain at current levels.”

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