The sustained high rupee price for gold is not having a significant impact on trade demand for gold in the run-up to the wedding and festival demand in the country. Although higher prices are leading to some consumer hesitancy in the short-term, there are indications that trade buyers expect the high price environment to continue and therefore remain committed to building stock, according to World Gold Council (WGC).
?The continuing fluctuations in foreign exchange markets have caused a short-term rupee price spike for gold. However, this must be viewed in the context of a longer-term gold price trend which has displayed a growth trajectory for more than 24 months. This is the focus of trade buyers and consumers we speak with who are now comfortable with a higher price level and view this as a reinforcement gold?s long term intrinsic value,? Ajay Mitra, the World Gold Council?s managing director for the Indian subcontinent, said.
The prevailing economic weakness and a subsequent depreciation of the rupee against the US dollar provide the context to today?s rupee price spike. A strengthening dollar and falling rupee saw the gold price in India reach Rs 15,000 per ten grams and has caused some speculation as to its impact on gold buying, ahead of the forthcoming wedding and festival season.
?Short-term prices spikes can lead to some consumer hesitancy, but despite rises during the last week, Indian trade buyers have continued to invest in stock building. They view the price trend as one that will endure and are committed to preparing for the upcoming festive season as usual,? he said.
