Indians have gone berserk.
At least as far as gold is concerned.
Indians have always been the largest consumers of the yellow metal, and now that global gold prices are down, they are thronging retail shops once again.
Reports coming in from some of India’s southern states, for example, speak of how gold stores were reporting empty ‘shelves’ even as gold retailers struggled to cope with the renewed demand. Retailers have reported an average 30 percent increase in sales in the last two weeks.
India is on the cusp of the traditional wedding season when gold purchases touch new highs, and delighted customers are keeping their fingers crossed, praying that the good times last till the end of the season.
Besides jewelry, coins and gold bars are also being picked up for investment purposes, despite prices firming up a wee bit earlier this week from the lower levels of the previous week (about US $490 per 10 grams). Jewelers said they were stocking bullion ahead of the Indian festival of Akshaya Tritiya (to be celebrated on May 13), considered to be an auspicious period for many Indians to buy gold.
The newest gold rush began in the second week of April when international gold prices fell 4 percent on April 12. The trigger for the slide was the talks of EU leaders suggesting Cyprus should offload part of its gold reserves to tide over its banking and credit crisis. As per market estimates, Cyprus may sell gold worth about half a billion dollars.
What has also beaten the prices is the fact that the US market, too, was showing signs of a recovery, leading to the strengthening of the dollar against the Indian rupee. Gold prices and dollar movement are inversely proportionate, and the stronger dollar has pushed gold prices further down.
On April 16, gold for June delivery on the Comex exchange in New York had reached US $1,321.50 an ounce, the lowest price since January 28, 2011.
India relies largely on gold imports to meet its internal demand, so any dumping of excess gold in the system will impact domestic prices.
Sohrab Darabshaw contributes an Indian perspective to MetalMiner.