Believe it or not, the crisis in Greece has hit the bullion market hard and the price of the yellow metal has breached its all time peak. It opened at $1,248.95 on Friday, well above the all time high of $1,126 that was set in March 2007. The continuing climb in the world gold price has created a scare in the minds of the trade in India, which has been pinning its hopes high on account of the Akshaya Tritiya on Sunday.
Industry sources say that after the trade and the jewellery industry went into recession last year, there was a significant rebound in the first quarter of 2010. The trade was hoping to cash in on the festive season revolving around the Tritiya on May 16 and even built up a substantial inventory. But “the Greek tragedy has hit us hard. Over the past two days, the bookings or orders have waned, though we still hope that families will throng the shops on Sunday,'' says G. Kasturirangan, manager of a leading jeweler in T.Nagar, Chennai.
World Gold Council vice president K. Shivram explains that in January-March this year, India has officially imported 192 tonnes of gold. This compared with a mere 26 tonnes during the same period last year. Buoyed by this consumption, trade and industry had prepared for a major launch for the May-June season on May 16. But the situation in Greece, and its possible repurcussions in a few other countries of the European Union, has sent gold prices soaring. “Gold has always been a safe haven for investors and in many countries of Europe too there has been panic buying — converting currency into gold. Continuing concern over the EU and this sudden spurt in demand has resulted in this surge in the price,'' he reasons.
Despite being a major consumer of the yellow metal, India's production remains at a meagre 3.5 tonnes. As a result, it imported 578 tonnes last year, which was 18 per cent lower than the previous year. Indian consumption works out to around 650 to 700 tonnes, with jewellery accounting for nearly 450 tonnes and the balance as investment in gold — in the form of coins.
The slow but steady drop in global production, along with a growing demand for gold, in addition to its becoming a safe investment, has led to a continuing rise in its price over the years. Industry forecasts the price to jump further to breach the $1,300-mark before long. Industry sources here estimate the Akshaya Tritiya sale alone to be in the region of 40 to 50 tonnes, with the south accounting for the bulk of it. The marriage season that follows this festival further boosts the sale, retailers say. About 65 to 70 per cent of gold or jewellery sale is for weddings.
With just one day to go, the trade is keeping its fingers crossed for the bumper sale on Sunday. As the value of the rupee has gained vis-a-vis the dollar, the hope is that the Indian buyer has not faced the full brunt of the gold price rise in the past few weeks.
