“People are expecting prices to drop more as the sentiment in the market is weak and selling pressure remains,” Chairman Haresh Soni said in a phone interview from New Delhi. The price volatility is discouraging buyers, he said. The federation represents about 300,000 jewelers nationwide.
Gold, which entered a bear market last week, extended a plunge on Monday to the lowest level since March 2011, on speculation that demand for haven assets will contract as the global economy improves. Bullion may slump to as low as 26,000 rupees ($476) per 10 grams by June after tumbling to the lowest since October 2011, according to Kotak Commodities Services Ltd. Consumers will wait for prices to stabilize, said Rajesh Mehta, chairman of Rajesh Exports Ltd. (RJEX)
“Buyers are watching the price movements closely and will purchase more if they decline further,” Mehta said by phone from Bangalore. Sales rose an average 60 percent to 70 percent in the past three to four days, he said.
Futures on the Multi Commodity Exchange of India Ltd. (MCX) fell 6.2 percent last week, extending losses this year to 14 percent. The June-delivery contract slid as much as 5.5 percent to 26,400 rupees per 10 grams on Monday, and was at 26,645 rupees at 2:36 p.m. in Mumbai.
Gold Plunge
The slump will help curb India’s record current-account deficit, provided imports stay the same, said Soni from the jewelry federation. The deficit, the broadest measure of trade, swelled to $32.6 billion in the quarter ended Dec. 31, or 6.7 percent of gross domestic product, stoked by gold and oil imports and subdued exports.
Gold for immediate delivery fell as much as 5.3 percent to $1,404.05 an ounce, and traded at $1,410.60. Prices tumbled 5 percent on April 12, taking losses to more than 20 percent since the record close in September 2011, meeting the common definition of a bear market.
Prices in India may fall below 27,000 rupees per 10 grams before the buying festival of Akshaya Tritiya on May 13 and extend declines if the rupee gains, Dharmesh Bhatia, a vice president of research at Kotak, said by phone from Mumbai.
Gold is bought during festivals and marriages as part of the bridal trousseau, or gifted in the form of jewelry by relatives. The festival season in India runs from August to October followed by the wedding season from November to December, and from late March through early May.
Demand for gold will remain strong because of weddings and festivals, Somasundaram P.R., managing director for India at the World Gold Council, said in an e-mailed statement today.
“Consumers have been resilient to price movements, looking forward to periods of price stability, when they build gold purchases into their household budgets,” he said.