Gold rush to summit sees demand trampled

Gold shot up to a lifetime high of `. 69,487 per 10 gm on Monday, marking a surge of 18.2% in the past six months, deepening the gloom among jewellers at Mumbai’s Zaveri Bazaar, who said the rise in prices is keeping customers away. Demand crashed 70% in the March quarter, according to them.

However, they’re optimistic about a recovery in sales with Akshay Tritiya, an auspicious occasion for buying gold, coming up early next month. Zaveri Bazaar is Asia’s biggest gold market and has a daily turnover of `. 450- 500 crore.

“The constant rise in prices has dented demand in a big way in this quarter,” said Surendra Mehta, national secretary of the India Bullion & Jewellers Association (IBJA). “According to our estimate, demand for gold jewellery at Zaveri Bazaar has fallen by 70%” in the March quarter, compared with October-December 2023.

However, investment in bars and coins rose 20-30% in the same period, according to Mehta. The Reserve Bank of India uses IBJA’s gold rate to decide the price of sovereign gold bonds. The price of gold has risen from `58,790 per 10 gm on October 1 last year.

Over the past decade, the return on gold has been 148%. In 2014, gold was `28,006.50 per 10 gm. Prices could move up further, analysts said. “Despite gold at an all-time high, the outlook still remains positive amid uncertainty over interest rate cuts by key central banks and (with) oil prices on the move, inching towards $90 per barrel,” said Pranav Mer, vice-president, equity brokerage group, commodity and currency research, JM Financial Services.

“Technically, we have seen a rally of nearly 10% in the past five weeks. Now we expect some profit-booking. However, the underlying trend remains positive, with upside potential seen till `70,550-72,000 per 10 gm in the near term.” He also pointed out that central banks are buying gold to hedge against higher inflation.

EYE ON AKSHAY TRITIYA

Jewellers in Zaveri Bazaar said people are bringing in old ornaments to be remade or exchanged for new pieces to meet wedding demand. “There is hardly any fresh buying of gold happening, as prices have skyrocketed,” said Kumar Jain, owner of Umedmal Tilokchand Zaveri, a jewellery house set up in 1915. “Customers are exchanging old gold only. The demand for gold jewellery has fallen by 70% in the just-concluded quarter.” Mumbai’s famed gold market has about 2,000 shops that sell bars, coins and jewellery to gold businesses and retail customers. “In India, the high price may initially impact customer buying patterns; yet, optimism is prevalent as Akshay Tritiya is round the corner, where we anticipate a surge in gold jewellery purchases,” said Mitesh Khimji, director of Bhubaneswar-based Khimji Jewellers. Akshaya Tritiya falls on May 10 this year