Spot gold declined by 1.5 per cent to hit the lowest in almost two months in early Tuesday trade. But it recovered by half towards evening on huge customer turnout to book their share on price fall.
The decline in gold prices in the domestic market was followed by a similar move globally on easing trade tensions between the US and China, albeit temporarily.
Standard gold (.995 purity) in Mumbai’s popular Zaveri Bazaar slumped to Rs 36,924 per 10 gram on Tuesday morning. This level has not been seen since August 7. Buyers, waiting for a correction ahead of the peak Dussera and Diwali season, saw this as an opportunity to buy the yellow metal.
The decline, however, was followed by a similar move in the international markets, which recorded 5.5 per cent fall since September 4 to trade currently at $1,468 per ounce (oz).
The sudden upsurge in demand has not only helped in the recovery of prices, but also narrowed the discount to Rs 80 per 10 gram on Tuesday, against Rs 160 per 10 gram a week ago.
“Gold price in the local markets declined following the global move. While the fundamentals remained strong in favour of gold, the correction in gold price was overdue. This proved a blessing in disguise for the Indian consumer. Going forward, there is limited downside,”
In fact, gold prices have declined by 4.6 per cent from their lifetime highs of Rs 39,031 per 10 gram the bullion hit on September 4 this year.
“The fall in gold prices has prompted consumers to book their requirement for the ongoing festival/wedding season. There was a huge customer turnout at jewellery shops with bookings for current and future deliveries. We have seen 15-20 per cent increase in our daily average sales on Tuesday,” said a trader to Business Standard.
Despite higher prices, the Indian consumers’ appetite for gold has not dimmed. The data compiled by the Ministry of Commerce showed India’s gold imports have jumped by 35.6 per cent to $11.4 billion in the April–June quarter this year, compared to 8.4 billion in the same period last year. Gold imports continued thereafter with a temporary slump in early September.
India imports around 650-750 tonnes of gold every year to meet the consumer demand for jewellery and investment products.