Consumers bolted to bag gold on Tuesday as the price of the precious metal hit a trough of Rs. 2,475 per gram (22 carat), a dip of Rs. 125.

In almost a year, it was for the first time that buyers could lay their hands on the metal for a price below Rs 20,000 per sovereign (8g)

But there are some customers holding themselves back expecting a further slide. The prices have been on the swing for over a fortnight. From Rs.2,780 on April 1, the price hit a low of Rs.2,600 on April 15. Gold had touched a historic high of Rs.3,000 per gram last year.

The steep slide has come as a relief to many customers during the wedding season as gold is still part of the dowry parents give to their daughters. People rushed to book gold at the present rate for purchases to be made months later as per schemes available at various jewellery outlets.

Jewellers say the time is ripe to buy gold. Further decline, if at all it happens, will be marginal and there is no scope for large erosion in prices, according to B.Govindan, working president of All Kerala Gold & Silver Merchants Association.

Cyprus has sold a few tonnes of gold; Italy and Spain are talking of selling their stock; but these are small in quantity in the overall global bullion scenario. Gold will continue to be in shortage as almost 80 per cent of yellow metal has been mined in gold mines across the world, Mr. Govindan says.

Will the rise in domestic demand give rise to more imports, which the government wants to discourage? There may not be much scope for a major shift, say industry experts.

There will be some pressure on imports, but the 6 per cent customs duty is a deterrent. Metals and Minerals Trading Corporation of India, the government agency involved in import and sale of gold, sells about 2 tonnes of gold to jewellers annually in Kerala. The figure is not bound to go up significantly, according to official sources. A prime reason is the entry of smuggled gold into the market.

One of the notable players in the present bullion scenario is the gold loan companies. A prominent company in the sector, based in Thrissur, has auctioned about 5 kg of gold ornaments last week. The ornaments, contained in about 1000 packets, were marked for sale on account of non-repayment of loan.

For such companies, future sale of similar commodity will be a matter to ponder over. Under the present situation which does not promise a jump in prices, the company may not be able to hold the defaulters’ gold for long. The unexpected shortfall is bound to affect the company’s profits as well. There has already been a dent in the share prices of these companies ever since the present golden slide show began.

More In: Kochi