Buying gold for the approaching festival season may burn a hole in your pocket as the yellow metal is turning red hot.
On Thursday, international gold prices recorded the highest single-day gain in nine years and domestic prices immediately followed suit. Gold prices jumped Rs 1,200 (10.2 per cent) in Mumbai to hit Rs 13,000 per 10 grams from the previous day’s close of Rs 11,800, according to Bombay Bullion Association.
The sudden spurt in prices followed panic buying in the global market as investors moved money from stocks to bullion during these troubled times in the global economy. Gold prices surged $85 or 11 per cent to $864 per ounce in New York (at 4:42 pm NY time).
The trend could see customers cutting down on purchases ahead of the festival seasons like Durga Puja (September 29-October 9) and Diwali (October 28) – considered as auspicious occasions to make investments. “Jewellery sales are likely to come down drastically,” said Harmesh Arora, vice president, Bombay Bullion Association.
“India was the biggest consumer of gold last month. But with this sudden jump in prices, people have made Rs 1.25 lakh per one kilogram of gold and the trend looks set to reverse.”
Buyers are certainly deferring purchases for now. Raksha Krishnakant Choksi, a housewife in Mumbai, had kept aside a certain sum to buy gold during the festive season.
“Now that prices have gone up so much, I am going to cut down on my purchases drastically,” she said.
Jewellery makers, however, think the trend could only be a temporary phenomenon and sales would pick up once prices stabilise.
“The consumer is scared of the volatility in prices,” said CK Venkatraman, chief operating officer, Tanishq. “If prices remain uniform over a period of time, people will buy gold as they know gold is an asset where one can safely park their money.” He added that the company’s usual plans for the festive season remained on track.
Gold prices had eased off in the recent months after hitting a record $1,034 per ounce on March 17. However, with global economy still buried in twilight hours following the US financial market turmoil, investors moving money from stocks to gold – considered to be an asset class that helps portfolios hedge against troubled times.