The Hindu Business Line : Gold imports down to a trickle

Mumbai, Feb. 2 Sharp fall in demand and high prices have led to 93 per cent fall in gold imports at 1.2 tonnes to 1.8 tonnes in January against 18 tonnes in the same period last year. In December, imports dipped to just three tonnes against 16 tonnes during in the same period last year. The country’s imports were down 47 per cent at 402 tonnes in 2008.

Mr Suresh Hundia, President, Bombay Bullion Association, said: “The demand for gold almost dropped down to negligible levels as prices skyrocketed to new high.”

Apart from spike in prices, retrenchments across sectors and financial crunch among investors have resulted in drop in demand for the luxury items such as jewellery.

Gold prices in December moved up from Rs 13,505 for10 grams to an all-time high of Rs 14,240 on December 30. Despite fall in demand, prices have moved up as investors found heaven in the yellow metal on fear of deflation.

Although investment in gold looks attractive, many investors have been struggling for survival after they lost a chunk of their investments in equities. A few investors have been forced to sell off their gold and silver to cover up their positions.

Bullish trend

Though prices are expected to fall, it will retrace as the effects of global economy turmoil hits the country.

Domestic gold prices are ruling at Rs 14,100 for 10 gram, while global prices are quoting $900 an ounce. Analysts expect prices to touch Rs 15,000 per 10 gram by February-end.

“Currently, gold prices are extremely volatile. It could touch the Rs 15,000-mark in next few day and scale up to Rs 16,000 per ten gram in the next three months if the uncertainty in the global financial markets continues,” said a Mumbai-based jeweller. The bullish trend in the yellow metal was further supported by investment from hedge funds and gold exchange traded funds.

Mr Harish Galipalli, Head of Research, Karvy Commodities, said: “Gold prices have decoupled from the dollar-euro movements as the economic fundamentals have gone for a toss after the recent developments. Prices are now determined by only the investment demand. Weaker the economic data, higher will be the gold prices”.