• Tuesday, May 21, 2024

Business

High gold prices hit India demand

India is the world’s second-largest gold consumer and a drop in purchases could limit a rally in global prices

Gold carries significant emotional meaning for numerous Asian families (iStock)

By: Eastern Eye

GOLD prices near record highs could dampen demand in India during the festival season and lead to the lowest purchase volumes in three years, the World Gold Council (WGC) said on Tuesday (31).

India is the world’s second-largest gold consumer and a drop in purchases could limit a rally in global prices.

Falling demand for gold imports could also help narrow India’s trade deficit and support the rupee.

Higher prices in the December quarter, which traditionally sees the highest sales of the year, could reduce purchases, said Somasundaram PR, regional CEO of WGC’s Indian operations.

Gold demand in India usually strengthens towards the end of the year. It coincides with the traditional wedding season and major festivals including Diwali and Dussehra, when bullion buying is considered auspicious.

Local gold prices jumped this week to `61,396 (£606) per 10 grams, near the alltime high of `61,845 (£611) hit earlier this year. Last year, prices in the December quarter were nearly 20 per cent lower than this year.

In the December quarter, demand is expected to be lower than last year’s 276.3 metric tons, Somasundaram said. “Currently, price is a significant influencer. If there is a substantial drop in price closer to Diwali, the entire situation could change.”

Diwali will be celebrated in the middle of the month.

Higher gold prices have been prompting some to sell their old jewellery and coins, leading to a jump in scrap supplies by 37 per cent from a year ago to 91.6 tons in the first nine months, the WGC data showed.

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