Consumer demand for gold is likely to be impacted due to the elevated prices, fewer weddings and election-related restrictions, said World Gold Council. As per WGC India Research Head Kavita Chacko, the price stability ahead of Akshaya Tritiya may provide some respite.
Demand for Gold
However she also mentioned that gold’s continued strong performance this year could encourage investment demand. As per The Economic Times, it took nearly a year for domestic prices to rise from Rs 50,000 per 10gm to Rs 60,000 per 10gm. However, the rise from Rs 60,000 per 10 gm to Rs 70,000 per 10 gm took little more than five months.
The WGC India review analyst further mentioned that the gold consumption demand, particularly demand for jewelery has been affected due to the swift price tick. Jewelery gold makes up around three-quaters of total consumption. Consumers are also awaiting stabilization in prices for fresh purchases and to benefit from the windfall gains, some have been resorting to exchanging/selling old jewelry.
Election related restrictions and fewer weddings this year during April-May have impacted the demand. Meanwhile, demand for investment gold options like coins, bars has seen an increase. The WGC attributes this uptick to anticipation of further price rise.
While some jewelers and manufacturers have been booking profits by liquidating stock and diverting gains to other investment avenues, many are facing a liquidity crunch which limits their ability to add to their inventories.
Domestic gold prices continue to trade at a discounted rate to the international prices despite a sharp drop in gold imports in March. Another factor influencing the price is the increased supply of recycled gold.
Gold prices have rallied since mid-February to reach unprecedented levels. Prices rose by 3.1% in April following an 8% surge in March.
Also watch: Gold jewelery demand dampens by price surge
