GOLD NEWS

Consumer demand for gold dampens as prices skyrocket

Wed April 03 2024

The unprecedented rise in gold prices, which now seem headed towards $2300/Oz, has left both bullion pundits and buyers flummoxed.

On Tuesday, the yellow metal created a new high of $2277/Oz in international markets, following it up with the record high of $2266 on Monday and conspired to keep prices in the local markets above 71,000/10gm mark

(999 purity including taxes).

"Gold has rallied almost 14% since mid-February on signs that the much-anticipated US Federal Reserve pivot is getting closer," said Saumil Gandhi, senior analyst - commodities, HDFC Securities.

"The rally has been supported by heightened geopolitical tensions, which have enhanced gold's appeal as a haven asset. In addition, central banks have been accumulating gold," Gandhi added.
Pointing out that nobody has a clue why gold is galloping the way it is, Indian Bullion and Jewellers Association (IBJA) national secretary Surendra Mehta said he feels China is buying gold heavily, driving prices up.
"Gold has given returns of around 14-15% per annum in the past four years. It is increasingly becoming less of a consumer commodity and more of an investment item," Mehta said, adding that IBJA prices also hit a new high of 68,961 (999 purity, without taxes) on Wednesday.

According to bullion analyst GPS Vigneshwar, there is no physical demand for gold in the market as the consumer is not willing to accept such high rates.

 
"Gold imports into the country are down sharply. After it crossed $2050 the physical demand is finished. Nobody is interested in holding gold at these prices," he added.

With no takers at these unsustainable prices, jewellers find themselves in a fix. "Jewellers are in serious trouble as business is down 70%-80% and no one will buy at these rates. Jewellers, who have picked up raw material at unfixed rates, need to make payments for the jewellery they have already made but has not takers," explained IBJA's Mehta.

According to Avinash Gupta, former director, All India Gems & Jewellery Domestic Council, the unprecedented price hike has been a key topic of discussion among the jewellers community, which is now trying to chart

out a roadmap for the future.

The only demand in the market is coming from consumers wanting to exchange their old gold for new, point out jewellers.

"Whenever gold prices rise, exchange tends to go up," admitted Ajoy Chawla, CEO-jewellery business, Titan Company. Agreeing, Hi-Tec City Jewellery Manufacturers Association president Mahendra Tayal said whenever

prices go up people tend to bring their old gold for exchange or to sell it.

Kapil Bulchand, director of Bulchand Trading, however, pointed out that apart from the steep price rise, the model code of conduct imposed by the Election Commission of India too has played spoilsport due to the 50,000 limit for carrying cash.

"Business is down 80% because of the double whammy of unprecedented price rise and the election effect. POT market is completely devoid of buyers. Only business we have is old gold exchange for new," added Anil Jain of Secunderabad-based M Nemichand Jain Jewellers.

Source: https://timesofindia.indiatimes.com/