“Nobody can predict which way gold prices are headed because prices are influenced by so many factors. The fundamentals look strong at the moment,” said Venkatesh Babu, president of The Jewellers Association, a Bangalore-headquartered trade body.
The depreciated rupee is a major factor influencing the price rise, Babu said. “Imports will be lower this year because of the weak rupee. They are already down 50 percent this quarter when compared to the same period in the previous year,” he said.
Gold imports ‘may decline by 250 tons to 350 tons this year as record prices in rupees cut into demand,’ Bloomberg reported. Gold consumption soared to a record 963.1 tons in 2011 when India imported a record 958 tons of bullion, according to the World Gold Council.
Gold jewellery sales are subdued this year, Babu said.
The quantum of sales are decreasing but jeweller’s turnovers are not, said Gaurav Issar, CEO and co-founder of JewelsNext.com, an e-commerce portal selling jewellery from across India.
India is a USD16 billion gold jewellery market. “Sales will not scale to half (of what it was in the previous year). Holding gold is as good as holding cash and Indians will continue buying,” Issar said.
India, in a bid to encourage other forms of investments outside of gold, imposed a four per cent duty on gold imports. “In spite of (government) restrictions, we are selling gold jewellery. At any rate, gold will sell (in India),” Babu said.