Jain said that this trend in domestic prices has developed ever since the government decided to liberalise the sector. There is not much scarcity of gold in the country and as such the domestic price fluctuation are not due to demand-supply position any longer. In festive occassions like marriages and diwali the rise in prices are only nominal ranging between Rs 100 to Rs 200 per 100 grams in case of gold.

The international price of gold is at present $296.75 per tri ounce and that of silver $4.80 per tri ounce.

Jain said that the situation can be further eased if the government removed the restriction period of six months in case of NRIs bringing in 10 kg of gold and the import duty on gold reduced from Rs 250 per 10 grams to Rs 220 per 10 grams. He said that the liberalisation of gold sector hashelped to reduce smuggling whcih at one time was of the order of 1100 gram per year.

The liberalisation of the gold sector began from June 6, 1990 with the abolition of Gold Control Order. But the two successive devaluation of the rupee in 1991 on July 1 and 3 at the rates of 9.5 per cent and 11.5 per cent had a telling effect on domestic gold prices. In February 29, 1992, the finance minister in his Budget speech announced permitting NRIs to bring in 5 kg of gold in a period of six months. In February 9, 1993, import of silver was permitted by the government and by March end, 1993, 133 tons of gold was brought in by NRIs. In March 15, 1993, Gold Bond Scheme was introduced.

Towards the last quarter of 1996, the domestic prices of gold in Delhi market almost tended to touch Rs 6000 per 100 gram mark due to the the steep slide of rupee against dollar. As a result, in Jauary 1, 1997, the government allowed NRIs to bring in 10 kg of gold in lieu of 5 kg in a period of six months.

MUMBAI
Bullionmarket at Mumbai witnessed hectic activity prior to Diwali as the buyers flocked to buy gold and silver which are cheaper compared to last year. While most of the old jewellers complained of less consumers visiting their showrooms, the aggregate sales of jewellers is increasing day by day. Sure there has been decline in the retail sales but the number of jewellers in the city has also doubled after the removal of controls on gold, opined ML Damani, president, Bombay Bullion Association.

He further said that if the state government abolishes the 2 per cent sales tax, the sales of both the precious metals which have been diverted to other centres like Ahmedabad and Delhi would come back to the city. He also advocated the need for uniform sales tax on precious metals all over the country.

Commenting on the measures needed to revive the bullion market in the financial capital of the country, he said that permission to forward and futures trading would provide much needed hedging facility to the traders asIndia heavily depends on the international market for the supply of gold and silver. The least that the government could do at the moment is permitting NTSD (non-transferable specified delivery) contracts.

The stock position in the country is comfortable and the banks are ever ready to import if the need arises.

Though the current import policy on gold and silver is commendable, much is needed in terms of setting up gold depository to ensure timely supply, he said.

In order to ensure that the smugglers do not become active again, it is necessary to avoid ad hoc measures like short term extension of the OGL (open general license) policy. On the contrary, it needs to be made permanent.

The difference between the gold prices in the domestic and international markets have narrowed down by 330 basis points- from 18.4 per cent in 1996-97 to 15.1 per cent in 1997-98.

This is the result of the impact of liberalisation which is signalling greater integration of the markets.The average spread in the goldprices between Mumbai and London markets narrowed down to 6.5 per cent in the first quarter of 1998 from the high of 19.9 per cent during the corresponding period of the previous year.

The average price of gold in Mumbai market declined by 14.3 per cent to Rs 4347 per 10 grams in 1997-98 from Rs 5071 per 10 grams in the previous year.The price of silver increased by 2.6 per cent to Rs 7352 per kilogram from Rs 7165 during the similar period.

The prices in the new samvat year 2054 are likely to rise behind the international prices,Damani opined.

CHENNAI
The gold and silver market in Chennai has seen brisk trading over the past two weeks. As the festival season sets in and the Diwali bonus and incentive packages increase the funds at the disposal of the salaried class, jewellery buying has gone up.

The retail and wholesale bullion market in the south is looking at a record performance this year. While traders, both retail and wholesale, are disinclined to reveal the turnover figures, thegeneral opinion is that the sales have been on a substantially higher level throughout the year. Gold prices, which were at an abyssymal low towards the end of 1997 and in the first two months of 1998, have since recovered on good demand. The festival season demand this year is expected to be much better compared with last year. In 1997, though the festival sales were pretty good, gold prices fell due to a bad demand situation in the international markets. This year, the international markets have also seen good demand, which has resulted in a steady bullion market.

Though the prices this season have not increased substantially, there has been a marginal increase in the gold metal prices, which is not entirely attributed to demand. The increase might also be due to the international price fluctuations, says Vummudi Nandagopal, a leading jeweller and the convener of the Gem & Jewellery Export Promotion Council (south).

In the south, maximum gold sales are seen only in the beginning of a new year, afterthe harvest season. But the demand, which starts picking up from Diwali, is sustained through Christmas and reaches the peak during the Pongal season. Reports from the trading circles say the demand pick up this year is pretty good given the recessionary trends in the country. A rough estimate of 12-15 per cent higher sales is indicated by leading jewellers in the city.

Prices of gold are in the range of Rs 420 to Rs 425 per gram in the retail market. The price band may move slightly upwards to a maximum of Rs 430 per gram by the end of Diwali, but more than that, they say.

CALCUTTA
The gold and gold ornaments market in Calcutta has gone into the usual Puja slumber and will revive around Diwali which falls on October 19. The wholesale gold market closed on September 27 for the Durga Puja festival and reopened on October 6. It had operated temporarily for a day in between.In the retail market, there is not much demand as the Hindu almanac has no marriage dates for Bengalis before late November.Also, around Durga Puja, there is an exodus of the non-Bengalis to their hometowns, mostly in Gujarat and Rajasthan, depressing demand further.

Buying of gold ornaments by Bengalis is invariably linked to marriages. With the earliest marriage date being November 21, gold ornament buying by Bengalis is also at a low ebb during the fortnight.

Pradip Ghosh, president of the Swarna Silpa Bachao Committee, an organisation of the city-based jewellers, said, "We expect buying to pick up during the last three days prior to Diwali, due to some Diwali buying by the non-Bengali customers. Even then it will be far less than the normal sales.""There are two exhibitions of gold ornaments in Delhi and Kerala going on at the time and some amount of gold buying by the non-Bengali citizens of Calcutta might take place at these places too. Many Calcutta-based jewellers are participating in these exhibitions," he added.

Anil Auddy, assistant secretary of the Bullion Merchants Association, an organisation of traders, said,"The market at Sonapatti in Calcutta had a downturn since September 19-20, more than a week before the pujas."

"During the period between Durga Puja and Diwali, the precious metal market goes to sleep in Calcutta. No one bothers about it during the festive season," he added.

"The market demand is polarised between non-Bengali demand and Bengali demand. There is hardly any festive buying by the Bengalis here. However, some purchase might take place in advance for the coming marriage season as the prices are low around this time," he added.