Forget Price Rise, Diwali Gold Import at New High.

MUMBAI: Record prices in excess of 20,000 per 10 gm do not seem to have dampened consumer demand for gold in the festive week of Diwali. On the contrary, all-India imports through the week ending Monday were expected to be 20-25 tonne, around 20% to 25% higher in volume terms and 40% in value terms from a year ago.

“High returns compared with what banks offer and ready encashability have led to imports by banks rising 34% in October to 43 tonne from a year ago, while imports in the festive week to Monday have risen about 25% to 20-25 tonne even as the price has risen by 28% to 20,119 since last Diwali ,” said Prithviraj Kothari, newlyelected president of Bombay Bullion Association and director RiddhiSiddhi Bullions.

Bullion dealers and traders buy gold from banks, which import the metal in bar form on consignment basis. According to Kothari, the festival season has seen a demand for 5gm to 50gm gold bars, especially from the lower- and middle-income groups, account for 60% of the imports and the rest by gold jewellery. “High-income groups have mainly opted for diamond jewellery,” Kothari added. Mumbai’s Zaveri Bazaar is the largest wholesale market for gold.

Shrenuj & Co. which sells studded gold and platinum jewellery through more than 85 shop-in-shop counters across the country, also expects demand to have been better than the previous Diwali.

“Part of the gains from a buoyant stock market and other investments are being apportioned to gold, which has largely been rising over the last decade,” said Umesh Shah, vice president (domestic jewellery division), Shrenuj & Co. “Our counters have witnessed increased footfalls and we expect demand to rise not just in value but in volume terms too.”

The reasons for gold’s rise have been the debasement of US dollar and the metal acting as a monetary unit, its utility as a hedge against tail risk (an unexpected loss due to an unforseen event like failure of the Greece financial system), dwindling faith in the monetary system as the Federal Reserve prints more money , and lastly it’s perceived as a hedge against inflation .

“The primary reason for the relentless bull-run in gold has been dwindling faith in the dollar as the US central bank prepares to inject more liquidity into the financial system by buying government debt. This is leading to increased investment demand for the metal in international markets, represented by the rising share of goldbacked exchange traded funds, which currently hold 2,085 tonne.”

Source : economictimes.indiatimes.com