Tuesday, May 4, 2010

Indian Retail Demand Likely Slowing This Festival Season

As reported in the Wall Street Journal, the Akshaya Trithya festival is usually a time to buy gold, as it's considered a blessed time for a wedding. This season, higher gold prices are likely to result in less gold being bought.
Gold sales in India's key cities usually pick up days before the festival - on May 16 this year - as buyers place early orders for delivery on Akshaya Trithya day, which is considered auspicious for weddings and starting of new ventures.However, with prices hovering above 17,000 rupees ($382.8) per 10 grams since last week, compared with around 16,500 rupees/10 grams just two months back, many prospective buyers are discouraged from placing new orders this year, they said....

"We could see sales of 35-40 (metric) tons this Akshaya Trithya at these prices," said Pravin Mehta, president of the Madras Jewellers & Diamond Merchants Association.

That is a far cry from an average 50 tons usually sold during the run-up to the festival each year.
Although higher prices are expected to take a toll, some may still buy gold because it's gone up (and is likely to continue to do so.)

At the wholesale level, demand is still stagnant, although there are indications that dealers are becoming acclimatized to higher prices.
"There are no deals today, prices are still high and even the rupee is not in supportive mode," said a dealer with a state-run bank in Mumbai....

"Even a drop of USD 5-10 could result in buying," said another dealer with private bullion dealing bank.

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