Price of 24 carat gold was at $512/10 gm and that of 22 carat was at $530 in the Delhi market on Wednesday
Gold prices in the Indian market crossed a 6-year high, touching $530/10 gm (Rs 37,800) on commodity exchange MCX on morning trading hours on Wednesday, riding on the back of a weakening Indian currency and rising geo-political tensions in Hong Kong and the lingering US-China trade war.
Price of 24 carat gold was at $512/10 gm and that of 22 carat was at $530 in the Delhi market on Wednesday.
“Gold prices in the Indian market are seeing a flare up because of multiple factors – fluctuations in the value of Rupee against US dollar, investors shifting their investments to bullion in the wake of uncertainty in the stock market and global factors such as rising geo-political tension,” Surendra Mehta, National Secretary, Indian Bullion and Jewellers Association (IBJA), told Arabian Business.
Mehta said he expected gold prices to cross the Rs 40,000 mark ($562/10 gm) by this weekend.
Traders said after seeing a steady rise in the last few days, gold prices showed a bit correction on Wednesday from the $537/10 gm level the previous day.
Incidentally, gold jewellery traders across the country have been reporting significant fall in sales in the recent months due to the rising prices.
“Gold prices are rising not due to rise in physical demand but because of significant shift in investments to bullion from stock market,” Ajay Kedia, managing director of Kedia Commtrade and Research, told Arabian Business.
“Rupee has seen a fall of about 4 percent in the last few days due to the rising geo-political tension in Hong Kong impacting Asian currencies adversely. This is also a major contributing factor for the sudden spurt in gold prices in India,” Kedia added.
Rupee has weakened to 71.13 against US dollar in the morning trading hours on Wednesday, from 68-69 level in most part of June-July.
Indian finance ministry’s decision to hike import duty on gold by 2.5 percent to 12.5 per in the current year’s Budget has added to the increase in gold prices in India.
Mehta said besides investment purposes, there has been a growing trend of Indian consumers buying bullion (gold biscuits) and getting jewellery made from that by their trusted goldsmiths, rather than buying from jewellery shops.
“The jewellery traders have themselves to blame for this situation as they are fast loosing consumer trust because of quality issues with the gold jewelleries sold by them,” Mehta added.
Besides, jewellers in India have been selling gold ornaments as a consumable product and not as an investment product as is the case internationally, Mehta said.
"This is leading to a steady rise in bullion sales," Mehta said.