Dhanteras demand: Gold may cross Rs 33,000 on shortage

With sale of gold coins down 70 percent this Diwali,those in the dry fruit business and chocolate makers are minting money this Diwali.

A liquidity crunch in the market and the rising cost of the yellow metal (gold prices have touched Rs 31,000 per 10 grams) is keeping buyers away, an Economic Times report said recently. Another report in the Hindustan Times points out that gold prices are likely to cross Rs 33,000 per 10 grams in the run-up to Diwali, though demand is expected to remain muted because of high prices and limited supply.

“There is scarcity of gold in the market due to the steps taken by the government . We are expecting prices of gold to rise in coming days as demand for gold is outpacing supply,” Kumar Jain, vice-president, Mumbai Jewellers Association was quoted as saying in the report.

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Yesterday Reuters reported that shortage of the metal sent Indian gold premiums to more than US$100 an ounce over London prices this month. Trade experts predict since bullion gold is not available in the market, there may not be enough gold sales in the city.

However, the year-on-year jump in domestic gold prices on Dhanteras this year would be very small from over last year’speriod because of weak global factors. As per the trade data, gold prices rose by 20 per cent to Rs 32,485 per 10 grams on Dhanteras day in 2012. Rates jumped by 37 per cent to Rs 27,130 per 10 grams on the festival day in 2011. In 2010, gold prices on Dhanteras day stood at Rs 19,740 per 10 grams.

In the domestic market, gold is being sold at a high premium due to supply crunch caused by government measures to restrict the import of precious metal in an effort to cut current account deficit.

Another ET report points out that jewellers are offering a host of freebies such as a trip to Dubai or a brand new Skoda to lure consumers as growth has halved this festival season due to volatlity in gold. PC Jeweller has announced schemes which offer free gold coins, discounts, bumper prizes and other prizes on buying jewellery of a minimum amount while Gitanjali is wooing customers by offering them a range of exclusive gifts at any of their stores pan-India, the report said.

[caption id=“attachment_1149421” align=“alignleft” width=“380”]  Hardly any gold came in for two months until mid-September and industry is still feeling the pinch, especially now the festival season has started, a peak period for demand. Reuters[/caption]

Little wonder that with less than 10 days left for Diwali, markets are flooded with eye-catching packets of dry fruits and chocolates. In fact, soaring prices of dry fruits have failed to have any impact on the sales . Even big corporate houses and business establishments are preferring to gift dry fruits and chocolates to their employees.

Perhaps the shift in consumer preference could be attributed to the slowdown in the economy as well.

An overwhelming majority of middle and lower class families will slash their festival budget by over 40 percent this Diwali season as they struggle to cope up with their monthly expenses due to rising inflation, less job opportunities and shrinking real wages an Assocham survey had said recently.

With inputs from PTI