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As stocks head south, gold heads north

The yellow metal, which hit Rs 13,700 per 10 grams (tola, in local parlance) in July and fell to Rs 11,300 in September, is now selling at Rs 13,800. Manish Pachouly reports.
By Manish Pachouly | Hindustan Times, Mumbai
UPDATED ON OCT 10, 2008 12:38 AM IST

Gold prices are riding the financial roller-coaster. The yellow metal, which hit Rs 13,700 per 10 grams (tola, in local parlance) in July and fell to Rs 11,300 in September, is now selling at Rs 13,800.

The peak comes right at the start of the festive season, when Mumbai normally buys gold in huge quantities.

The high prices have hit sales badly. Nemichand Sanghvi, director of the Bombay Bullion Association, told Hindustan Times that Mumbai normally averages sales of 3,000 per day. Now, daily sales average 150 to 200 kg.

Gold prices have been on the rise in the last 25 days as the global financial crisis hit home. “On September 14, when prices jumped from Rs 11,300 per 10 grams to Rs 12,600, demand fell,” said Suresh Hundia, president of Bombay Bullion Association.

He pointed out that in September, 64 tons of gold were imported, of which 22 tons remains unsold in banks. The imported gold comes to some banks and to importers who sell to traders.

Hundia said there had been no imports since then. “Only investors who had stocks lying with them or those having old gold are selling,” he added.

Hundia blamed it on the financial volatility. “Stock indices across the world have fallen,” he said, which is making investors shift to gold. “People are selling [other securities] and buying gold.” The weakening rupee is also a factor.

According to Hundia, gold prices would stay volatile till the global economy settles down. Incidentally, the demand for gold has risen for similar reasons in China, said Sanghvi, which is contributing to the price rise.

Kumar Jain, vice-president of the Jewellers’ Association, said business is slow. “We are only working on orders we got a month ago when prices were low,” he said. “At that time, the demand was such that we had to keep the shop open till 10.30 pm. Now we close it by 8.30 pm.”

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