Gold retailers in Mumbai's Zaveri Bazar are offering a discount of up to Rs 220 per 10 gram on landed cost of gold to boost sales, as the yellow metal is trading near an all-time high. The offer fetched them a marginal 10 per cent of normal sales on Saturday.
The metal was sold at Rs 18,850 per 10 gram, against the landed cost of Rs 19,070. The spot gold was sold below the landed cost due to the weak demand for the metal.
Last week, gold rose 2.45 per cent to a record high of $1,260 an oz in the global market, as the sovereign debt crisis in Europe increased gold's status as a safe haven investment.
However, the domestic market was somewhat unaffected, as the rise in the value of the rupee kept gold weak, compared to the global rise. The rupee closed the week at 46.17 against the dollar, after hitting a high of 46.94 during intra-week trading.
GFMS Ltd, the London-based independent research company, had earlier forecast that gold would hit $1,300 an oz, before taking a downward leap. Fuelled by Europe's fiscal woes, low interest rates and concerns over the stability of paper currencies, the precious metal has risen nearly 15 per cent in the last six-seven months.
"The discount is a usual phenomena which retailers and primarily jewellers offer to attract sales when consumers abstain from fresh buying due to some factors. This time, too, gold jewellers used the weapon as physical buyers remain totally absent," said Prithviraj Kothari, director of Riddhi Siddhi Bullion, one of the largest gold retailers in Mumbai.
Daily sales have declined by 90 per cent. Since wedding season, the largest buying opportunity in India, is already over and the next festive demand will emerge only in September-October, gold sales are expected to remain weak for the time being.
Kothari forecast India's total gold import during 2010 at 400-450 tonnes, as against 343 tonnes and 418 tonnes in 2009 and 2008, respectively. The World Gold Council reported India's gold imports at 739 tonnes between April 2009 and March 2010.
Gold sales are passing through a typical phase - where buyers are waiting for a correction to pass on fresh orders, while sellers, in contrast, expect prices to surpass the psychological barrier of Rs 20,000 per 10 gram to start profit-booking.
Analysts like Bhargav Vaidya of B N Vaidya & Associates and Prithviraj Kothari of Riddhi Siddhi Bullion Ltd feel that gold may hit the aforementioned psychological barrier as early as next week on global cues, but may not sustain the level.
Magan Lal Choudhary of Jugraj Kantilal & Co, a large jewellery retailer in Mumbai, said gold demand had been lacklustre due to the sudden spurt in prices, but a discount would offer some breather to jewellery retailers.
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