In the face of falling prices of gold and silver, import of these precious metals has started in a small way. This is likely to gather momentum in the coming weeks on expectation of higher demand.
Major gold consumers such as India and Turkey had stopped importing gold in the last few months. However, global markets are now looking at Indian demand for further cues.
Over 10 tonnes of gold have arrived in India in the first half of this month, said a senior functionary at the Bombay Bullion Association. Silver import has also begun, he said. Though some silver stock was available, more imports were expected on falling prices, he added.
Gold prices came down by 10.80 per cent, or by Rs 285, to Rs 14,045 per 10 gm in the Mumbai spot market today compared with its previous close. It hit the peak of
Rs 15,745 on February 21. Silver today fell by 10.93 per cent, or Rs 850, to Rs 20,690 a kg from its previous close. On the Multi-Commodity Exchange (MCX), the May silver contract traded below Rs 20,000. It was trading at Rs 19,897 in early evening trades.
Earlier, prices were rising internationally and gold was quoted at a discount (to landed cost) in India. This has led to a halt in import, while premium in overseas markets tempted arbitrageurs to export gold in the form of crude jewellery. Since prices have fallen now, demand has emerged and Akshaya Tritiya — an auspicious day for buying gold — may further boost demand.
Even as gold is falling in international markets, almost 14 per cent down from $1,000 per ounce in the third week February to $868 today, traders are awaiting demand from India ahead of the festival on April 27. According to a Barclays commodities analyst, “In coming weeks, key festivals in India should offset a weaker economic outlook, and we expect prices to find initial support around the mid-$800s. Prices may see upward movement from there.”
Globally, investors have booked some profit, resulting in a fall in prices, but Barclays expect that investors would re-enter the market. Even the traders in Mumbai’s jewellery market expect the demand to re-emerge.
Traditionally, gold has provided good returns. According to the World Gold Council (WGC), gold is one of the most secure investment options available to Indian consumers.
“While the current economic condition may have dwindled returns from other forms of investment, Indian housewives, who have been passionate gold enthusiasts, and investors are still reaping high returns from their investments in the form of gold jewellery, coins etc,” said WGC in its latest study.
According to WGC, gold has provided an annual average return of 26 per cent over the past decade (1999-2008).
Source : Business Standard