Brexit brought bad news for jewellers on Friday as gold price touched a two-year high of Rs 31,700 per 10 gram in Indore markets.
It was the biggest single-day gain since August 2013. Jewellers said the sudden spurt in price will impact the demand of gold jewellery.
Prices of gold, the traditional safe haven in times of market turmoil and financial uncertainty, jumped up 6% in domestic markets after panic in global markets over Britain’s decision to exit from the EU. Traditionally, investors buy gold futures to insure against falling currency and stock markets.
Demand for gold jewellery has remained subdued due to various factors, including a rise in prices. The jump in price come at a time when jewellers - maintaining thin inventory due to weak retail demand - were looking to replenish just before the start of festival season in August.
Indore Sarafa market had suffered a loss of more than Rs 1,200 crore during the six-week long strike against 1% excise duty on non-silver jewellery.
Brexit also lead to a free fall in global equity and currency markets. The rupee hit a four-month low of 68.21 against the US dollar, a development which will make gold imports expensive.
“Gold prices are expected to move higher. This can make buyers cautious as it is the fluctuation that bothers them more than high prices,” Indore Sona Chandi Vyapari Sangh president Hukumchand Soni said.
“The market is subdued and buyers are only making inquiries. Most of them are postponing purchases, expecting a correction in prices,” jeweller Rajesh Jain said.
With the hope of a good monsoon, jewellers are banking on a rise in rural demand for the yellow metal. Rural demand is weak now as farmers are busy with sowing of summer crops, dealers said. Indore being a major market attracts a large number of rural buyers after the harvest season in October and November.