Gold prices breached the Rs 40,000 mark for 10 grams on Monday and reached a three-year high, and silver followed suit as well. This came amidst a trade war, increase in demand and a continuous slide in the rupee’s value.
While gold prices increased, the rupee slipped to its lowest value this year, at over Rs 72 for a dollar. Gold prices increased across the world and reached a six-year high, amid the ongoing trade war between USA and China.
Typically, the demand for gold reflects the expectations about the future; the price of the precious metal tends to rise amid uncertain economic situations or political upheaval.
According to Bamalwa, if the current global political crises and the trade wars continue to escalate, then the gold prices may shoot up further, crossing Rs 41,000 per 10 gm in the next few months. Despite the zooming prices, demand for gold may be marginally affected, around 10% or so, as the wedding and festive season begins next month.
Gold is still very much considered to be one of the primary investment options of Indians, and is also considered a safe investment option which is highly liquid. Higher prices of gold would mean that that it may be out of reach for consumers, and hence traders believe that along with a slump in sales, customers will choose to recycle their gold in the upcoming season.
All Indian Gems & Jewellery Federation Chairman Bachhraj Bamalwa said that instead of fresh purchases, people may opt for recycling of old gold, at least up to 25%, in view of the higher prices.
Mumbai Jewelers’ Federation President Rakesh Shetty “People simply prefer to bring in their old gold and pay the making charges for their needs as the current rates are too high. If the current global crises continue, then we expect it to cross Rs 41,000 for 10 gram by Diwali, which is not a healthy sign for the industry,” According Bengaluru Jewellers’ Association, their sales had come down to 20-25%.