Gold sales slip as record prices deter consumers Close.

KOLKATA: Gold sales plummet in the retail market after Akshay Tritiya as prices touch a lifetime high of Rs 30,000 for 10 gram, but bullion dealers and jewellers see no respite as a weaker rupee makes the imported precious metal costlier.

Consumers who traditionally buy jewellery during April-May in preparation for the wedding season in June are now staying away. "Prices have hit the roof as taxes and the weakening rupee have made gold expensive compared to the previous peak of Rs 29,516 in mid-November last year," said Siddharth Mehta, chief strategist, Rajesh Exports, India's biggest gold importer and exporter that owns retail chain Shubh Jewellers.

"Retail price today is at a historic high. At this level, buying will fall further unless some corrective measure is taken," said Bachhraj Bamalwa, chairman, All India Gem and Jewellery Trade Federation.

The ripple effect of dull consumer demand is being felt in the wholesale market. "There is hardly any physical demand for gold. The mood is bearish at Zaveri Bazaar as well," said Prithviraj Kothari, president, Bombay Bullion Association president.

India's April gold imports are at 35 tonne versus 90 tonne last year, when prices were at Rs 22,200. On MCX, gold futures saw support at Rs 29,950 and Rs 28,800 levels, while there was resistance seen at Rs 29,200 and Rs 29,430. The current record prices have also affected demand for the exchange-traded gold funds that are used by investors to buy gold in demat form, analysts said.

"Demand for physical gold from Asia remains low with India's dampening buying interest. Investors will closely watch the key US non-farm payrolls data scheduled to be released on Friday as well as today's ECB rate decision meeting for cues on fresh direction for bullion," said Amarsingh Deo, head of commodities and currencies at brokerage Aditya Birla Money.

Analysts say the weakening rupee, which raises landed costs, is not allowing Indian consumers to benefit from gold's current bearishness in the international market. Gold spot prices declined on Thursday, hovering near $1,646 an ounce, primarily on back of weakness in the euro and economic concerns over Europe which led to the strengthening of dollar.

"RBI should come forward to strengthen rupee, otherwise it will affect the domestic demand," said Gnanasekar Thiagarajan, director, Commtrendz, a technical analysis firm.

The other dampener has been higher taxes. Retailers charge VAT of 1% to their profit margin of up to 3%. In January this year, the government tweaked customs and excise duty structure on precious metals.

Besides, in the Union Budget 2012-12, Finance Minister Pranab Mukherjee proposed an excise duty of 1% on non-branded jewellery and doubled import duty on gold to 4%.

Where will it go from here? Opinions are divided. Gold should stabilise in the wholesale market between Rs 29,500 and Rs 30,000 shortly, said Anjani Sinha, managing director and CEO, National Spot Exchange.

Gold will reach Rs 35,000 within next six months, said Rajendra Singh Bader, vice president, Delhi Jewellers Association.

Source : economictimes.indiatimes.com