Gold price to offer positive returns this Samvat

Mumbai-India (Oct 17)  Gold is heading for its first Samvat gain in three years in domestic trade, on a sharp rebound in global markets following steep decline in the dollar and renewed physical demand. Both retail consumers and stockists are building their inventory amid fears of a resurgence in gold prices as anticipated for the ensuing festive season.

Following global cues, standard gold jumped 8.65 per cent since its recent low of Rs 24850 per 10 grams on August 6 in the benchmark Zaveri Bazaar here to hit the high of Rs 27,000 per 10 grams. But, the rising trend took a temporary break on profit booking by opportunistic investors.

Gold offered negative returns on the last two muhurrat trading sessions with Samvat 2071 (Oct 23, 2014) and Samvat 2070 (Nov 3, 2013), gold offered negative returns of 9.15 per cent and 4.42 per cent respectively. On the occasion of muhurrat trading this year i.e. Samvat 2072, gold price is set to touch Rs 29,000 per 10 gms in domestic market and $1235 an oz globally. On achieving this level, however, gold will offer over 5 per cent returns from the previous year (Rs 27590 per 10 grams) and nearly 8 per cent from the prevailing level of Rs 26930 per 10 grams.

"Expecting a rebound in prices, consumers booked huge quantity of gold ornaments when gold hit recent lows. Since, consumers stay away from fresh buying during inauspicious fortnight of "pitripaksha", they booked gold for delivery in Navratri. Their deliveries have started now. Along with that quantity, there has been huge demand from new customers as well as traders' expect gold price to touch Rs 29,000 per 10 grams this Diwali. So, consumers are booking for festival as well as wedding season," said Kumar Jain, Director, Umedmal Tilokchand Zaveri, a Zaveri Bazaar based bullion dealer and jewellery retailer.

Echoing similar response, Gnanasekar Thiagarajan, Director, Commtrendz Research, said, "More than festive demand and Diwali purchase, falling dollar is supporting gold's price move. Therefore, in dollar term, we are expecting gold price to touch $1235 translating thereby in local currency at Rs 28,500 per 10 grams."

This time around, global stockists build their inventory for preparing ornaments for the Christmas, the New Year and the Mother's Day celebrations that constitutes nearly 30 per cent of the annual sales. In India, too, stockists start booking in large lots to meet the wedding demand ahead.

To add the sentiment, however, jewellery demand has been robust so far this year reflecting huge surge in gold import in the last few months. The World Gold Council forecasts India's gold demand 950 tonnes this calendar year. Meanwhile, India's gold imports of between 850 tonnes and 900 tonnes in 2015, compared with 891.5 tonnes in 2014.

"The onset of the festival and wedding season in India in October - December quarter suggests healthy prospects for jewellery demand for the remainder of the year. And there are tentative signs that the recent drop in gold prices has lifted appetite for gold in both China and India, with interest having picked up a little following the price fall," said a recent report by the World Gold Council.

According to Thiagarajan, gold availability from used gold (scrap) has been substantially low this year in India which simply indicates that consumers await price to remain firm. On raising interest rate by the United States Federal Reserves (US Fed), gold might come under pressure, he added.

Source: BusinessStandard