Major bullion banks have imported nearly 130-150 tonne of gold over the past two months. This has been the highest level of imports in the year, after prices trended below the $900-an ounce mark. The yellow metal has a positive correlation to crude oil and negative correlation to the US dollar. The dollar softened against the euro and pound in reaction to the data, in turn helping gold to recover some of its losses. Gold spot showed high fluctuations during September- with the metal touching a high of Rs 13,484 per 10 gm during the month and then plummeting to a low of Rs 11,082 to finally close the month at Rs 13,189.
?There is no demand. Even after the fortnight of shraadh, the demand will be poor as the price is high. Gold stocks with banks are now lying idle as buyers of gold have become more price-sensitive,? said Prithviraj Kothari, managing director, Riddi Siddhi Bullions Ltd (RSBL). ?Nearly 30 kg-40 kg of jewellery scrap in the Mumbai physical market is coming in daily, as many people are choosing to sell their old gold items when the price is lucrative,? he said.
The demand for scrap is rising, as it is relatively cheaper than standard gold. Even as gold is selling at a discount in the physical market, the lack of demand is pushing many traders to consider the re-exporting route, sources pointed out.
Amid volatile prices and slow demand, banks have reduced their silver imports. The white metal is currently being imported purely on the basis of need, as high costs have made it logistically unviable to store. With the festival demand just picking up and depending on the urgency, banks are charging customers a premium of anywhere between 20 cents – 25 cents an ounce for silver, a trader said.
Silver also edged up on mild industrial enquiries. Fresh buying by stockists and jewellers amid a firming trend overseas mainly led the rise in gold prices.
The last week of August had seen a record demand for gold on the back of a rising dollar and with falling crude oil prices pushing gold prices further down, the demand for the yellow metal further increased. Demand also improved gold import to 98 tonne in August 2008, as against 69 tonne in the same month of the previous year.
The chief of metals consultants GFMS said that gold could surge above $1,000 an ounce as the financial crisis fuels safe-haven fund buying, but may then come under pressure as fickle investors slow purchases. Gold struck a record of $1,030.80 in March.
Gold analysts said that Lehman?s impact pushed the dollar and stocks lower, prompting investors to seek a hedge against market risk. Weak equity market also boosted gold prices, as some of the investors shifted their funds into precious metal. However, rising prices are unlikely to slowdown demand for gold as stockists are enlarging their positions in the wake of festive season.
Fearing more tightening of credit markets, investors reacted swiftly and began dumping stocks and socking money into gold, silver and other safe-haven commodities. Gold is especially attractive during times of crisis because the metal is known for holding its value.