The MCX spot price, with which the Mumbai standard price generally maintains a premium of Rs 100-115, rallied to Rs 31,330, up Rs 1,182 or nearly 6%, since Thursday.
The gains were supported by a 15% rebound in global prices towards $1,377 per ounce from a two-year low of $1,200 witnessed in late June. The Indian rupee, which has lost more than 12% of its value in the year so far, also supported the increase in gold prices. The rupee fell to an all-time low of Rs 62 against the dollar on Friday.
Market participants, however, say that a more than 24% jump in domestic prices during the last seven weeks does not reflect strong domestic consumption, even as perceived supply constrains have added to premiums. Generally, the demand picks up ahead of the wedding season, which coincides with the last quarter of the year.
Tribhovandas Bhimji Zaveri CEO Prem Hinduja says typically the demand in the quarter ending September stays weak and the rise in consumption ahead of the wedding season gets reflected in imports from the last week of September.
Hinduja does not expect rising prices affecting this seasonal trend. We have seen the wedding-linked demand staying strong even when prices were near all-time highs in late November last year, he adds.
This view is also resonated by the World Gold Council in its recently released quarterly gold demand survey.
While WGC expects a more than usual dampening of Indian demand in the September quarter due to changes in import regulations, it says indication for the fourth quarter demand remains positive. A good monsoon season so far also bodes well for demand later in the year with the assumption that the market will by then have had time to digest the recent restrictions imposed by the RBI, it notes in the survey.
WGC has pegged the June quarter gold import into India at 338 tonnes due to a 71% y-o-y jump in the total demand, including jewellery consumption of 199 tonnes and bar and coin demand investment of 122 tonnes.
Meanwhile, Indian prices in the recent past also include a premium component due to recent import restrictions. Although the premium has averaged at $5 per ounce or R100 per 10 gm, smaller jewellers have been charging higher premiums of $10-12 in the recent past as imports have practically come to a standstill in the past one month, says a market expert.