According to the World Gold Council, a rally in gold prices to an all-time high in India is deterring local buyers in the run up to what is normally a key demand period next month.
Gold futures in the second-biggest consumer jumped to a record 60,455 rupees $734 per 10 grams last week. The metal has gone up about 15% in the past year in India because of haven demand and a weakening rupee. The country imports almost all the gold it uses, mainly from Switzerland and the UAE.
People tend to wait and watch, and they want to be sure that this is not a blip and that prices will continue to rise, said P.R.. Somasundaram, regional chief executive officer for India, is a member of the London-based council. If prices are steady around current levels, demand may return for the key buying day of Akshaya Tritiya in April, but continued volatility will force people to stay away, he said in a Bloomberg Television interview.
He said they will probably wait for the monsoons and the fourth quarter when there are key festivals like Diwali. He said that the stock markets have turned a bit attractive for long-term investors, and that will be a boon for demand if prices continue to rise.
A high import tax makes smuggling attractive, as well as record local prices. The cash market is at a discount, so activity has increased tremendously in the wake of Covid, said Somasundaram.
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