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Price drop unlikely to lift gold demand

11 September 2019

 

Gold may lose its glitter for many people this festive season, even as its price has eased after surging past Rs 40,000 per 10 gram. Traders said demand is unlikely to go up unless the economy revives and there is sufficient disposable income in the hands of people.

 

Demand is likely to fall 40 per cent yearon-year during the festive season, according to the India Bullion and Jewellers Association (IBJA), if the current economic scenario continues. “A drop in gold price will not help revive demand in the country,” said Surendra Mehta, secretary, IBJA. “Economy needs to revive for creating demand in the market, not only for gold but for everything. People have no disposable funds in their hands to splurge on gold.”

 

Mehta said the need of the hour is to bring down direct taxes and generate some additional funds in the hands of people. “If that doesn’t happen, then it will be difficult for the gold trade during the festive season. Demand may fall 40 per cent compared to that last year,” he said. Jewellery demand during last year’s festive season was around 180.1 tonnes while the investment demand was 56.4 tonnes. The total gold demand in 2018 was 760.4 tonnes, according to the World Gold Council data. Traders said it is not only retail customers who are staying away from gold. Even jewellers are not restocking gold in anticipation of a muted festive season demand, they said.

 

Mukesh Kothari, director of the bullion firm RiddiSiddhi Bullion, said bullion sales had slowed down considerably. Bullion dealers are offering a discount of $40 per troy ounce to jewellers as there is little demand for the precious metal. “Onam sales have also not been encouraging. Gold demand is expected to remain muted in the rest of the festive season too. Unless the government comes up with a major economic boost, demand will not go up,” he said. Aditya Pethe, director of Waman Hari Pethe Jewellers, said that the Ganpati festival did not evoke much demand for gold. “Sentiment is terribly muted and footfalls have fallen drastically. August was the worst month for the gold trade. High price of gold has also dented the demand. We are keeping our fingers crossed for the upcoming festive season,” he said. On Wednesday, gold was trading at Rs 39,241 per 10 gm in the spot market. It had crossed Rs 40,000 per 10 gm on September 5.

 

Source: https://economictime