“A surge in global gold prices to record highs could dampen consumption during the wedding season in India, but top buyer China will see robust safe-haven demand this year” stated analysts and traders.
India being the second-largest consumer of gold witnessed a fresh hike of 65,587 rupees per 10 grams.
The sudden peak in prices had led to decline in demand. As a result, prospective dealers issued $14 an ounce over the stated domestic rates that is 15% import and 3% sales leverage.
“Consumers can’t wrap their heads around current price levels. If prices stay this high, it’s going to affect demand during the ongoing wedding season,” added Prithviraj Kothari, president, India Bullion and Jewellers Association Ltd.
“There’s no reason for banks and refiners to import. March imports would be negligible,” Kothari added.
“Scrap supplies are increasing. Consumers who need to buy are exchanging old jewellery for new,” stated Ashok Jain, proprietor at Mugold Chenaji Narsinghji in Mumbai.
“While the price spike has driven some selling, demand will be up after some time as people get used to these levels,” stated Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.
“The mindset changes, and as the market goes higher, it almost validates the reason you’re buying,” Ross Norman, independent analyst from London said.
This prompted the analysts to estimate that the sudden increase in gold prices could be a traction point for fresh investors to seek other areas and attract engagement.
