Gold Prices Peak in World’s Largest Consumer Market
Feb. 18 – Just ahead of the auspicious wedding season gold prices in India have soared to an all time high topping US$950 an ounce or Rs. 15,000 for 10 grams. India is the world’s largest consumer of the metal and demand usually piques ahead of the wedding season.
Experts believe the high prices can be attributed to several factors. Indians usually buy gold as the safest form of investment. Economists feel that due to the economic crisis Indian banks and financial institutions have been hedging gold which has led to the sky high prices. A weakened Indian rupee and high prices are also believed to have hit demand this year.
“Record prices have seriously hurt demand,” Rajesh Mehta, chairman of Rajesh Exports Ltd., India’s biggest jewelry producer and exporter, told Bloomberg in a telephone interview from Bangalore. “The economic slowdown isn’t helping demand either.”
The abnormally high prices of gold have increased the flow of scrap and old gold in the market and reduced gold futures as experts expect prices to dip as demand falls. India has drastically cut gold imports into the country.
"There are people standing outside to sell old gold," Kapil Kumar Chokshi, a partner at Chokshi Arvind Jewelers in Mumbai's Zaveri Bazaar a hub for gold merchants told Reuters. "We are expecting (more such) people to arrive by this evening," he added.
Gold jewelry is the most common gift during religious events and forms an essential part of the dowry basket in India. The country consumes more than 30 percent of annual global gold output and devours 800 tons of the metal, mostly as jewelry.
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