After the relentless rally, spot gold prices have fallen by ₹7,270 per 10 grams, or four per cent in last eight trading sessions to ₹1,54,884 on Friday against ₹162,154 logged on August 26, due to th sharp appreciation of the rupee against dollar.
Rupee has appreciated against dollar by 1 per cent to 94.49 on Friday against 95.35 on August 26 on the back of $127 billion mop-up through FCNR deposit.
When rupee appreciates the value of dollar-denominated gold depreciates and it makes the yellow metal cheaper for consumers in rupee terms. However, any sharp dip in gold makes consumers to cut down on gold purchases in anticipation of further fall in prices.
Domestic silver prices have also dipped four per cent or ₹9,935 per kg to ₹2,35,456 on Friday from ₹2,45,391 logged on August 24, according the India Bullion and Jewellers Association data.
In the US, the spot gold prices had fallen 3 per cent from $4,654 an ounce registered on August 26 and fell to $4,523 an ounce on Friday.
Prithviraj Kothari, President, India Bullion and Jewellers Association said many consumers prefer to wait rather than buy gold during period of uncertainty and this leads to bunching of purchases around perceived dips.
Soften gold price
A steadier or stronger rupee, in turn, softens the domestic price of gold somewhat, since a large part of India’s gold is imported and priced based on USD-INR conversion. This could offer some relief to jewellery buyers already contending with elevated global gold prices, he said.
The overall footfall likely holds up reasonably well, but average ticket size and gold volume per purchase could see a mild dip if volatility persists, he added.
Rajesh Rokde, Chairman, All India Gem and Jewellery Domestic Council said the fall in gold prices should overall help gold demand during the upcoming festive season, with the industry continuing to encourage responsible consumption, transparency and value creation.
Even as gold prices may remain volatile, people buy gold for weddings, festivals, auspicious occasions and as a form of long term wealth and security for the future, he said.
Selective festive demand
Aarav Bafna, Director, Akoirah by Augmont said volatile gold prices are making festive demand more selective rather than smaller in value as consumers continue to prioritise weddings and auspicious purchases.
If prices settle after the recent volatility, deferred demand should return relatively quickly, particularly during weddings and the main festive buying days, he added.
Supriya Kataria, Founder, Kumari Fine Jewellery said FCNR deposit flows can certainly provide a favourable backdrop for jewellery consumption, particularly during the festive and wedding season.