Gold demand halves despite fall in prices.

KOLKATA: Gold demand this month has halved from a year ago despite the fall in prices and expectations of better purchases in the wedding season as consumers are being cautious and younger people prefer to spend on fancy gadgets rather than the precious metal.

Gold prices have fallen by Rs 300 to Rs 400 per 10 gram as the rupee has strengthened against the dollar and premium on gold has dropped to $105 per troy ounce from $125-130 per troy ounce a week ago. But consumers are not splurging.

"Compared to last January the market is down. Volatility in gold is also affecting the market. Consumers are very cautious on purchasing gold. Inflationary pressure is also keeping away consumers from buying gold jewellery," said Haresh Soni, chairman, All India Gem & Jewellery Trade Federation.

The lull in demand comes at a time when price of the yellow metal has come down to Rs 29,500 per 10 gm from Rs 30,000 per 10 gm. "The crunch in raw material supply is affecting the organised sector of the trade. The 80:20 rule is not at all workable. Now that the current account deficit is almost under control, government should do away with the 80:20 rule which will give the right signal to buyers," Soni added.

The lull in demand comes at a time when price of the yellow metal has come down to Rs 29,500 per 10 gm from Rs 30,000 per 10 gm. "The crunch in raw material supply is affecting the organised sector of the trade. The 80:20 rule is not at all workable. Now that the current account deficit is almost under control, government should do away with the 80:20 rule which will give the right signal to buyers," Soni added.

He also added that the government has indicated that $30 billion worth of gold can be imported. "This means that the country can import 650-700 tonnes of gold. And the government should also reduce the import duty. If that is done then genuine consumers will return to the market," Soni said.

Supply crunch has also affected demand in South India that consumes nearly 40% of the imported gold. Amjad Hussain, marketing director, Malabar Gold & Diamond said, "Wedding season demand is much less this year compared to last year as consumers are in no mood to buy gold jewellery due to the overall economic gloom. Currently Kerala is celebrating Pongal. We expect some movement in the market after Pongal. Young generation prefers diamond jewellery over plain gold jewellery where the gold c ..

The gold trade also pointed out that gold jewellery is the last choice of the young generation. "Young minds prefer to buy smartphones or ipads over gold jewellery. But gold should be treated as an instrument of social security," Soni added.

Source : economictimes.indiatimes.com