Fears of gold shortage in the physical market have gripped jewellers following a sharp rebound in demand amid the prices of the precious metal soaring to new highs daily in global and domestic markets.
With the gold prices skyrocketing every day, consumers are rushing to purchase jewels at the lowest possible price. “Gold is in demand more for investment than jewellery,” said N Anantha Padmanaban, Chairman of Chennai-based NAC Jewellers.
On Tuesday, gold prices gained ₹692 per 10 grams to close at another high of ₹1,19,941 per 10 grams in Mumbai spot market against ₹1,19,249 on Monday, according to Indian Bullion and Jewellers Association (IBJA) data. The yellow metal has gained ₹6,679 per 10 grams in last six trading sessions. On MCX, December gold futures increased to ₹1,21,090 per 10 gm.
In the global market, gold touched a fresh high of $3,985 an ounce, while December futures on US’ Comex topped $4,000 and was quoted at $4,006.12 at 1845 hours IST.
Kumar Jain, National spokesperson, IBJA, said customers with wedding in the family are rushing to buy jewellery at whatever price as they fear prices to firm up further.
This apart, he said the industry expects the Dhanteras is going to be one of the best season as people are already pre-booking on fear of prices going up during the festival in next few days.
“If this demand trend continues, we are expecting a shortage of gold supply in the market though the supply is stable at present,” he said.
Currently, the premium on gold hovers at about $8-13 an ounce (28 grams), a sharp pull back from a discount of $8 logged in same time last month.
CA Surendra Mehta, National Secretary at IBJA, said silver and gold were commanding a premium of ₹4,000 a kg and ₹8,000-10,000 a kg, respectively.
Saurabh Gadgil, Chairman and MD, PNG Jewellers, said the festive sentiment is highly optimistic and the demand this season is expected to outperform last year both in terms of volume and value.
The demand for gold coins and bars (bullion) continue to do well, while bangles, necklaces and diamond jewellery are showing encouraging momentum, he said.
“Dussehra buying has begun on a very strong note. We have received enthusiastic response in our new markets of Madhya Pradesh and Uttar Pradesh, which gives us great confidence in the brand’s future in these states,” he said.
Renisha Chainani, Head of Research at Augmont, said gold imports have slowed due to soaring global prices, volatile currency market and supply bottlenecks. “Refiners and large traders are holding limited stocks. There is a mismatch between supply and demand. The squeeze is reflected in rising spot premiums, including underlying demand despite elevated price levels, “ she said.
The latest rally has been spurred by the US government shutdown entering the second week and economic uncertainty. The US Senate again rejected Democratic and Republican proposals to fund the government and end the shutdown which has entered sixth day.
US shutdown
The official shutdown of the US government for the first time in seven years has crippled key federal operations, air traffic, visa services and immigration process.
The deadlock between Republicans and Democrats over funding bills and health insurance subsidies triggered the government shutdown on October 1.
Darshan Desai, CEO, Aspect Bullion & Refinery, said gold prices have hit new record highs, with futures reaching $4,000 an ounce on the Comex. This surge comes as the US government shutdown stretches into its sixth day, and political turmoil in France adds to global uncertainty.
A combination of retail and institutional buying, along with ongoing hopes for a Federal Reserve rate cut, despite the lack of key economic data, has been holding gold prices high, he said.
Any pull back on gold prices from these highs, it could present a buying opportunity for investors looking to enter the market, he added.