BOMBAY, 11 February — This week, Indian investors have a dream run not only on the Indian bourses but also on the Indian bullion markets. While Indian bullion bankers were sitting pretty with not a single sale having taken place during the past week, the Indian investors made a quick buck. Prices of gold on Friday were at Rs.4,970 per 10 gram (22 carat) in the Bombay market, while it was Rs.4,980 and Rs.4,720 respectively in Kolkata and Chennai. In Delhi, the prices zoomed to cross a five-year record level at Rs.5,080 per 10 gram as against Rs.5,050 on Jan. 3, 1997.
Gold prices were quoted at Rs.58,000 per bar in Ahmedabad and there were no buyers at that level. The weakness in the Indian rupee against the dollar, down 1 percent since the start of 2002, also has made the metal costly in the domestic market, which depends largely on imports. Traders attributed the sharp gain in prices to concern from Japan’s general public over safety of the country’s banks, and from stock investors over weak equity performance. International gold market may have been buoyed by South African gold producer Gold Fields’ announcement that its earnings had tripled in the past quarter due to a weaker rand and an 11 percent increase in gold production.
This recent seesaw movement in the yellow metal prices has unnerved Indian buyers and they are now just content to trade scrap metal or recycled gold ornaments.
This increase in prices has led to a standstill in gold imports and trade in India, the largest gold importer in the world. While the family-run jewelers are hugely affected by the rise in prices, the branded jewelry market is not worried.
Indians had begun buying at around $278-$280 per troy ounce. But the jump in prices which is now at $297.75 to $298.75 a troy ounce, has completely halted the business. The current scenario in the Indian gold markets is that there has been a huge deluge to sell off but on the other hand, there has been no demand at all. There has been a complete halt on the buying, given the current rates. Indians have become very cautious, it’s an unfamiliar price band for them. It will take some time for both importers and retail buyers to reconcile. Indians are very price sensitive and now traders are waiting for some indication on the level at which prices would sustain.
Imports of the metal into Ahmedabad, India’s leading bullion market, has come to naught compared with about 4,000 bars (of 116.64 gm) imported daily about a week ago. India’s annual gold demand is around 850 tons with 600-650 tons met through imports.
India imported 359.3 tons of gold in the first half of 2001, up from 267.2 tons in the same period of the previous year, according to the World Gold Council. Gold demand in the country rose to 490.4 tons from 417.8 tons in the same period. The gap between demand and imports are met by recycled and smuggled gold. So what happens in the coming days? Analysts across the globe opine that global prices may be headed lower but are unlikely to return to $270 to $275 per ounce, a level attractive for Indian importers. They say that the bullion prices are moving to a new comfort level of $279-$285 per ounce. Pertaining to the Indian markets, traders agree that the buying has definitely come down but since the marriage season is on, people would have to buy. However, the quantity of purchases will reduce. This current phase of high prices was labeled as a medium-term effect‚ and was likely to continue till July-August. There is no doubt that the Indian bullion market is bullish and traders are expecting further gains in the coming days. It is expected that in the coming days, the prices of gold could easily move $10 in a day right now, and could trade back to $295 or go up to $315 a troy ounce.
So what does an investor holding a lot of gold do right now? The writing on the wall is quite loud and clear — sell now, sell all that you have! Infact JP Morgan’s Nick Moore has gone on record stating that this was the best time to take profits in gold, look for retracement, buy the dips. “With a wobbly dollar, wobbly equity markets, toxic corporate balance sheets and crumbling banking regimes ... holding gold is a great way to preserve capital,” says Moore.
In the current scenario, gold is the anti-currency, and when there are concerns with the financial system, gold tends to go up, that has always been the historical trend. This is the time to bring out all our shining yellow metal and sell it to make a killing in the markets. Gold is right now the safest investment haven and you should make hay while the sun shines!!
