Indians love buying gold, sustaining demand even during the traditionally slack summer months, as the FT reported on Monday. But with gold prices breaching the $1,600 an ounce barrier on concerns over the eurozone debt crisis, could the skyhigh prices finally put the brakes on India’s demand for the yellow metal?
Maybe.
“The demand for the precious metal may slack this month due to high prices, profit-booking by traders,” Prithviraj Kothari, president of the Bombay Bullion Association, tells beyondbrics.
Traditionally, Indians buy gold, quite often in the form of jewellery, around festivals starting from October. But as the prices of the yellow metal have surged over the past couple of years, Indians have started to invest in the metal whenever there is a small correction in prices and when the budgets allow. This in part has helped propped up gold prices this summer.
“We saw last year when there was a considerable increase in gold prices, the demand was also strong,” says Kavita Chacko, assistant vice president of commodities at Angel Broking. “People have adjusted to high levels of gold prices and we don’t see too much of an impact on demand due to the recent hike.”
Chacko remains bullish on the commodity and expects prices to touch $1,650 in the short term.
Kothari, who also expects gold prices to hit the $1,650 – $1,670 mark over the next two weeks, is more sanguine on the sustainability of this demand however.
He says if prices continue to rise, Indians will start to melt old jewellery to mould newer ones for the wedding season whether than buy new jewellery.
In addition to jewellery buying, gold prices is also being driven by Indian investments in gold-linked financial products such as ETFs. As the FT reported, investments in exchange traded funds backed by physical bullion rose to a record 2,156 tonnes on Friday, according to Barclays Capital.
Amit Khanna, a Delhi-based trader says that despite record prices, many are not selling in anticipation of higher returns in the next couple of weeks.
“No one is buying because it is the peak of the market at this particular price, if you see a correction you will start to see the demand rise again. But no one is selling either because people expect the price to go up further,” he tells beyondbrics.
Maybe.
“The demand for the precious metal may slack this month due to high prices, profit-booking by traders,” Prithviraj Kothari, president of the Bombay Bullion Association, tells beyondbrics.
Traditionally, Indians buy gold, quite often in the form of jewellery, around festivals starting from October. But as the prices of the yellow metal have surged over the past couple of years, Indians have started to invest in the metal whenever there is a small correction in prices and when the budgets allow. This in part has helped propped up gold prices this summer.
“We saw last year when there was a considerable increase in gold prices, the demand was also strong,” says Kavita Chacko, assistant vice president of commodities at Angel Broking. “People have adjusted to high levels of gold prices and we don’t see too much of an impact on demand due to the recent hike.”
Chacko remains bullish on the commodity and expects prices to touch $1,650 in the short term.
Kothari, who also expects gold prices to hit the $1,650 – $1,670 mark over the next two weeks, is more sanguine on the sustainability of this demand however.
In addition to jewellery buying, gold prices is also being driven by Indian investments in gold-linked financial products such as ETFs. As the FT reported, investments in exchange traded funds backed by physical bullion rose to a record 2,156 tonnes on Friday, according to Barclays Capital.
Amit Khanna, a Delhi-based trader says that despite record prices, many are not selling in anticipation of higher returns in the next couple of weeks.
“No one is buying because it is the peak of the market at this particular price, if you see a correction you will start to see the demand rise again. But no one is selling either because people expect the price to go up further,” he tells beyondbrics.
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