Domestic gold prices recorded a fourth straight session of fall to hit their lowest in almost a month on Tuesday, responding to a drop globally, which will cheer consumers ahead of the Dhanteras on November 9 and stoke fresh buying interests, reports Banikinkar Pattanayak in New Delhi.
While spot gold prices dropped to Rs 26,232 per 10 grams in Mumbai on Tuesday, the metal was trading at $1,130.20 per ounce in New York at 1030 GMT, the lowest since October 5 in both places.
Gold prices declined in the global market over the past few days on fears of an interest rate hike by the US in December and lacklustre purchases by India (even in the build-up to Dhanteras and Diwali, considered auspicious
for gold buying) and China.
While a slowdown in China has put a lid on gold purchases there, a second straight year of a poor monsoon, a crash in commodity prices and slow wage growth have dented the purchasing power of rural Indians, the biggest buyers of the precious metal in the country. However, with the latest drop in Indian prices — Rs 575 per 10 grams in the last four sessions — jewellers expect the situation to change for the better in the country, provided prices stabilise at this levels and don’t fluctuate too much. Gold prices in Mumbai have dropped almost 5% since last Dhanteras on October 21, 2014. Smaller jewellers have witnessed only marginal growth in sales since the start of October while larger ones have seen a 10-15% rise in sales from a year before.
Already, jewellers have stocked up adequately to cater for the festival and marriage demand, which was reflected in the massive surge in imports during July and August, although the purchases from overseas dropped in September. Still, the country’s gold imports value rose close to 20% in the first half of the fiscal from a year before. Even the World Gold Council is expecting Indian gold demand to rise to 900-1,000 tonnes in 2015, compared with 841 tonnes in 2014. This is despite a 7% fall in gold demand in the first half of the current calendar year from a year before.
Factoring in the fall in the precious metal prices, the Reserve Bank of India on Tuesday fixed the public issue price at Rs 2,684 per gram for sovereign gold bonds, for which applications will be accepted between November 5 and 20.
The rate has been fixed on the basis of a simple average of closing price for gold of 999 purity of the previous week (October 26-30) published by the India Bullion and Jewellers Association. However, since any price appreciation in gold has to be borne by the government upon the maturity of such a bond, fixing the issue price at a low level enhances the risks for the Centre.