Gold in the Indian market traded at a discount for the first time in a month, as the increasing prices prompted many jewelers to postpone all purchases. The increasing price of gold this week has exhausted retailers and made consumers think twice before making buying decisions during the present festival period
China, a close neighbor to India, and one of the biggest buyers in the gold market, saw an improvement in demand with increased seasonal buying during the year.
“Jewelers are delaying purchases expecting a correction in prices. The sudden price rise surprised them,” said Harshad Ajmera, who is the proprietor of JJ Gold House, a wholesaler in the eastern Indian city of Kolkata.
Local gold prices in the Indian market have risen by a massive 3 percent during this year, due to the upward trends in the local market and the cumulative depreciation of the rupee in relation to the dollar. The falling Indian rupee means that the cost of imports has increased, leading to an increase in prices within the market.
“Jewelers are struggling to understand the price trend due to volatility in the rupee. They are making small purchases,” said a Mumbai-based dealer who owns a private bullion-importing bank.
Dealers within India were offering consumers a discount of around $1.5 an ounce over the official domestic gold prices during this week. The previous week saw retailers charge consumers a premium of $2, but that has reversed during this week’s trading. The domestic price set in the market also includes a 10 percent import tax on the price of gold.
Ajmera, from the Indian subcontinent, mentioned that the demand for retail jewelry in the open market was moderate as consumers thronged to make purchases in consideration with the festive and wedding season currently underway.
Gold is an essential part of festivities and weddings in India. This wedding and festive buying makes India the second biggest consumer of gold in the world, after China. Not only is the precious metal given to people during weddings, but it is also given as a gift to other people.
“Demand has been good in China and Hong Kong… Retail investors are buying gold because of the wedding and festive period,” said Brian Lan, who is the managing director at dealer GoldSilver Central.
Retailers from both China and Hong Kong charged premiums of $5 to $7.4 an ounce during the last week. Concrete news from Hong Kong suggest that the premiums charged were less, as the premium kept within a tight range of $0.9 to $1.5.
While the higher prices in Singapore have softened the demand for the metal, premiums were slightly lower at $0.6 to $0.7.
Spot gold prices in the global market touched a near five-month peak during trading on Thursday as it reached rates of $1,244.32.
Gold prices in Japan remained on part with the international standards for the 12th week on the trot.
“Sentiment in gold is shrinking and if the price doesn’t change demand will decline,” said a trader based in Tokyo.