But business-to-business (B2B) sales of gold have dropped by more than 25-30 per cent because of the rise in prices. Gold price has appreciated by 5 per cent since the beginning of this year.
“The demand for gold has dipped at the B2B level significantly. Rupee depreciating against the dollar was initially the reason for the trade not to buy gold. But the fear among the trade is that rupee will now settle at around 66 against dollar and gold prices internationally will not go up. Therefore, stocking gold at this level will not be profitable for the trade,” Surendra Mehta, national secretary, India Bullion & Jewellers Association (IBJA), told ET.
“People are more interested in selling gold to make money rather than buy it. We have seen that if price of gold goes up internationally, then investors get lured to the yellow metal. Currently, the fear of a fall in gold price is also keeping consumers and investors away,” Mehta explained.
Ketan Shroff, managing director, Penta Gold, said that there’s a discount of Rs 60,000-80,000 per kg of gold in the market as there are hardly any takers for it.
“A lot of scrap gold, or old gold, is coming to the market now. If the monsoon is normal, then only will the market look up and demand will generate.”
India annually consumes 800-850 tonnes of gold. Rural India accounts for 60 per cent of the country’s gold consumption. Therefore, monsoon plays a big part in gold consumption because if the crop is good, then farmers buy gold from their earnings to create assets. On the contrary, if monsoon is deficient, then farmers tend to sell gold to generate funds.
Analysts also feel that the rupee will appreciate from the current level. Rupee has depreciated by 7.5 per cent till Friday when it had crossed the 68 level. “Rupee has shown some recovery today (Monday) and it will settle around 66.55-66.70. Crude prices have started falling as Opec, Russia are planning to raise supply which will further strengthen the rupee. However, global dollar continues to remain strong because of good economic data from the US. “We do not see gold prices moving up immediately, and therefore gold investment isn’t likely to pick up in the short term,” said Gnanasekar Thiagarajan, director, Commtrendz Risk Management.