Consumers deferring gold purchases until Diwali anticipating a fall in prices may be in for a shock. Gold prices will likely edge up by up to 12% to a record R35,000 per ten grams by Diwali, tracking a spike in the global market, according to a top industry executive.
Gold in the domestic market is expected to trade in the range of R28,500 to R35,000 per ten grams until Diwali, and there are greater chances of the metal staying in the range of a record R32,000 to R35,000, Bombay Bullion Association president Prithviraj Kothari told FE. The precious metal hovered near record level at R31,320 per ten grams in Mumbai on Tuesday, recording a 15% gain so far in 2012.
?Gold prices may hit new highs around Diwali as rising tensions in West Asia may increase demand for the safe-haven investment. Civil war in Syria and geopolitical tensions in Iran are major factors pushing up prices of gold despite the fall in physical retail demand from India, China, and some other countries,? Kothari said.
The doubling of an import duty on gold to 4% and a rally in the global market have already driven up domestic prices. Adding to the consumer’s worry, the rupee has depreciated by 9.2% so far this fiscal and 21.3% in the past one year, making overseas purchases even more expensive. While the average gold price surged 28% in 2011 in the dollar term to $1,571.52 per troy ounce, its 11th straight rally, domestic prices jumped by 32% due to a weak rupee.
The underlying demand for gold in India is still robust, although the retail consumer is waiting for the right time to buy, said Ajay Mitra, managing director (India & the Middle East) at the World Gold Council.
?A strong possibility of the US announcing a third round of quantitative easing to boost the economy may also drive overseas gold prices up to the level of $1,800 an ounce,? Bombay Bullion Association’s Kothari said.
