Bullion traders in India are afraid of gold price these days. The big news of India buying 200 tonnes of gold from the International Monetary Fund (IMF) sent the yellow prices to dizzy heighs this week. Gold traders say the record jump in prices has sent the bullion market across the country to silence.
“There is no buying happening at these high gold prices. Customers are coming to jewellery shops to sell old gold, not to buy new gold ornaments and gold coins. Everyone feels that this is a market to sell, not to buy,” says Sanjeev Srivastava, a gold trader in Mumbai’s Zaveri Bazaar.
According to Srivastava, scrap gold sales are zooming in India thanks to the record price rise in yellow metals. "At least 10 tonnes of scrap gold must have been sold in the Mumbai bullion market this week. People are cashing in on the bull market in gold," he said.
But Srivastava, who used to supply at least two tones of gold to various jewellery shops across India, says jewellery chains are holding on to the old stocks as there is hardly any buying happening. “Only parents whose daughters’ marriage are fast approaching are the ones who are buying gold these days. Gold investors are keeping away from the bullion market as the prices are very high,” he sadded.
Gold prices touched a record 16,677 rupees per ten grams this week in Mumbai markets. On Friday, strong rupee and dull buying pulled down gold prices a little bit to 16,567 per ten grams.
Karan Khan, another bullion dealer said that gold buying will pick up during the wedding season in India which is expected to last till December end. “By that time, I feel gold prices might fall from the record prices that we are seeing these days,” Khan told Commodity Online.
On Friday, the Indian rupee strengthened to its highest in more than a week as currency traders sold dollars on gains in the local sharemarket and watched the US dollar movements.
Gold prices in the Indian bullion market have been going up this week on the big news that the International Monetary Fund (IMF) has sold 200 tonnes of gold to the Reserve Bank of India (RBI) for $US6.7 billion.
In April this year, IMF decided to sell 403.3 tons of gold as part of a plan to shore up its finances and lend at reduced rates to low- income countries. In the last few months, there have been reports that China and India could be the suitors to purchase the IMF gold. India has jumped into the fray by buying almost half of the IMF gold at about $1,045 an ounce.
Dubai-based bullion analyst Mark Robison says everyone expected China to buy the IMF gold in the first phase. “It is a surprise that India has jumped in the first place to purchase the IMF gold. India is the largest marketplace for gold in the world. I think by buying IMF gold, India has shown increased interest in diversifying out of US assets as the dollar loses value against other currencies,” Robison told Commodity Online.
China is the world’s biggest gold producer. In April, China increased reserves of gold by 76 percent to 1,054 tons since 2003.
In fact, IMF has kick-started the gold selling plan by selling the first tranche of the yellow metal to India, the largest consumer of gold in the world. The gold sales were conducted daily over a two-week period from Oct. 19-30, to "give some protection to short-term fluctuations in the market".
The sale is part of an agreement struck in September among IMF member countries to sell 403.3 tonnes of the fund's gold stocks to diversify its sources of income and to increase low-cost lending to poor countries.
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