Gold rallied to a record high of Rs 71,080 per 10 gram on Monday, crimping demand for jewellery a day ahead of a Hindu festival considered auspicious for gold purchases.
Price of the yellow metal rose 1.72% or Rs 1,198 per 10 gm from last Friday.
Rising prices of precious metals come ahead of Gudi Padwa and Ugadi, the auspicious day on the Hindu calendar marking the beginning of New Year in certain parts of the country. The price surge has dampened mood among potential customers who prefer to buy gold to celebrate this auspicious day, which will fall on April 9 this year.
Sachin Jain, regional CEO, India at World Gold Council said: “Gold has now touched a historic high price of Rs 71,000 per 10 gram in India. There has been a near stagnant jewellery demand in the first quarter of calendar year 2024 in rural and urban centres as per anecdotal feedback from jewellery retailers.”
“Also, during the general election period for the next two months, there will be heightened scrutiny on the movement of gold and cash. Except during festivals, gold jewellery demand will likely remain subdued during a large part of Q2 of CY24 even if prices moderate over the coming months. On the flip side, higher prices could encourage investment into gold-linked digital and investment products,” Jain added.
Higher prices is leading to lower sales volume at jewellers though value-wise, sales are at par with last year. Baby George, chief executive of retail jewellery chain JoyAlukkas said, “Volume-wise sales have gone down by 5% this Ugadi compared to last Ugadi which was on March 22. We are offering a gm of silver against a gram of gold purchased to attract customers this Ugadi”.
The current bull run in gold prices is a combination of factors, explained Jateen Trivedi, VP (research analyst) at LKP Securities. “Firstly, the heightened geopolitical tensions in the Middle East are increasing risk perceptions, prompting investors to seek safe-haven assets like gold. Secondly, central banks globally are continuing to add their reserves in gold, indicating long-term buying interest and bolstering demand. Additionally, the prospect of rate cuts in the US is positively impacting gold prices.”
With gold prices touching an all-time high, the whole jewellery sector is preparing for tepid demand. “Amidst unstable gold prices and a decrease in demand, we at Bhima are hopeful to tackle this challenge by driving demand for our offerings. With the Ugadi, Puthandu, and Vishu festivities in the South, followed by the upcoming summer wedding season and the auspicious occasion of Akshaya Tritiya, we anticipate a surge in demand for the yellow metal in the first quarter of FY25,” said Vishnusharan Bhatt, managing director of Bhima Gold.
