High price has also affected gold demand in northern India, which is known for lavish weddings.
Kolkata: Gold demand is likely to drop 20-25 per cent month-on-month in February as the price of the precious metal has increased to a high of about Rs 42,000 per 10 gm, said industry executives.
Bullion dealers and jewellers said there was apprehension in the industry that uncertainty fuelled by the coronavirus outbreak might result in a further increase in gold prices in the coming weeks. Lesser demand in the market has forced bullion dealers to offer gold at a discount of $2-3 per ounce to jewellers.
“High price of gold is impacting demand. Gold demand will be less by 20-25 per cent in February compared to January,” said Prithviraj Kothari, president of India Bullion & Jewellers Association. “Consumers were getting used to gold price of around Rs 39,000-39,500 per 10 gm. But the outbreak of coronavirus pushed up prices.” Anantha Padmanabhan, chairman, All India Gem & Jewellery Domestic Council, said gold price may touch Rs 44,000 per 10 gm by the middle of March if the coronavirus outbreak is not contained.
Global equity markets and government debt yields slumped on Friday last week as growing concerns over the impact of coronavirus on global growth overshadowed a strong US jobs report that indicated an economy poised to grow moderately. Gold prices rose on Friday as fears of an economic slowdown from the coronavirus outbreak and lower interest rates globally offset positive economic data from the US. Spot gold price rose 0.3 per cent to $1,570.52 per ounce.
“The drop in demand is around 20 per cent. There is no excess money in the hands of consumers to buy gold,” said Suvankar Sen, executive director, Senco Gold & Diamonds. “China has closed down manufacturing activities in certain areas to avoid spreading of coronavirus. This is going to affect worldwide supply. This may affect global stock markets and gold may gain a safe haven status. People will definitely buy gold but in lesser volumes.”
High price has also affected gold demand in northern India, which is known for lavish weddings. “People are buying gold in lesser volumes. But investment demand for gold is expected to go up as returns from gold in the last one year have been much more than from any other asset category,” said RK Sharma, chief operating officer, PC Jewellers.
Courtesy - ET