Commodity Online
The strengthening of the Indian Rupee has spurred renewed interest from Indian Jewellers, many of whom are looking to restock their gold before prices surge to new highs. The Rupee in now around 49 after hitting above 53 in Dec 2011
Weakening Rupee had made gold imports expensive and combined with higher processing cost, Jewellers were finding it tough to attract the price-sensitive Indian buyers while maintaining their profit margins.
But with the Rupee now strong, jewellers have restarted placing orders for gold believing that the current correction may not extend for long and the Rupee might begin to weaken again.
India's general import-export trend has been disappointing of late. Higher imports and lower exports have meant that the current account deficit keeps ballooning, thereby putting further pressure on the Indian Rupee.
But even though, jeweller buying has resumed, what will be most important is consumer demand. Indian consumers are very price sensitive and the current high prices in gold is deterring purchases- as evident by the sharp drop in gold during the last quarter of 2011. Demand from investors will remain encouraging due to the global uncertainty but if the general public too understand the current global economics, they will start to discount price surges and demand will sky-rocket.
At the MCX, gold prices remain in bullish territory, rising from Rs 27300/10 gm in January 2012 to currently trade at around Rs 27950/10 gm, a gain of 2.30%.
