With gold stabilising over the last two days after the price crash across markets over four trading sessions, the retail buyer is in a quandary as to when to buy.
Considering that the Indian ‘festive’ season is just underway, the activity seen at retail outlets over the last two days points to a pick-up in buying but in smaller quanta despite a fall of over Rs.3,000. It was last trading at Rs.25,700 on the MCX, and at $1,417 an ounce on the global markets.
“It has become increasingly clear over the course of the past week that the fall in gold price was triggered by speculative traders operating in the futures markets,” Aram Shishmanian, CEO, World Gold Council, said in a statement, adding, “Their short-term view of generating a trading profit is in stark contrast to the views of long-term investors in gold, as evidenced by the massive wave of physical gold buying that began over the week-end and accelerated following Monday’s further decline. Buyers are viewing this as an opportunity to purchase gold at prices not seen in the past couple of years.”
Madan Sabnavis, Chief Economist, Care Ratings, told The Hindu, that “Gold has been in the ‘price moderation’ phase since early October 2012 after a decade of continuously increasing and outperforming nearly every other asset class.”
He felt that the foremost factor for last week’s fall was the change in investor sentiments, “triggered by recent lowered price forecasts for the metal. Large liquidation in gold exchange-traded funds (ETFs) further supported the bearish outlook in the metal.”
Gold coin shortage
“There is pent-up demand for jewellery and coins in the market,” Suresh Hundia, President-Emeritus, Bombay Bullion Association, told this correspondent.
“Big investors are not seen but at Rs.26,000 levels, there was a coin shortage with retailers are charging a Rs.200 premium.”
“We are already seeing shortages for bars and coins in Dubai while premiums in Mumbai are at $26 an ounce and $6 an ounce in Shanghai,” Mr. Shishmanian said.
Dealers have booked forward and with banks shut over the long week-end, imported coins would be customs-cleared and enter the market by Tuesday.
“Then the premium will go away,” Mr. Hundia said, adding, “There is still some apprehension about the price. While it seems to be temporarily settling, if any large bank, fund or country (like Cyprus) starts selling, it could precipitate another fall.”