Vilas Sharma, a small time businessman from Madhya Pradesh, just sold off a portion of his household gold to make some quick money to meet his ailing mother’s medical expenses. Far away in Mumbai, AnujPandey, an accountant with a private firm, sold off some gold coins to take advantage of the price hike in yellow metal that crossed ` 34,000 per 10 gm on Wednesday.
Both Vilas and Anuj had bought gold during this year’s Akshay Tritiya (in the month of May) when gold touched ` 25,500 per 10 gm level. “I had some exposure in the equities but as the stock market has crashed I have not come out from the market. Since I had bought some gold during Akshay Tritiya I thought to leverage the present rally to meet my medical expenses,” says Vilas. Anuj on the other hand, has just offloaded his gold to get some quick money. This is however, not only an urban phenomenon. Even rural India is taking advantage of this price rally and in certain pockets of Maharashtra and Madhya Pradesh, where crop loss is feared due to excessive rains, people are selling off household gold to take advantage of the present rally. “I do not know whether gold will reach this level again. So I have offloaded it,” said Vishnu Mukati, a soya bean farmer from Hosangabad district of Madhya Pradesh, whose crop has suffered due to heavy rains.
There has been a sudden jump in scrap gold in the market and on an average scrap dealers in Mumbai’s Zaveri Bazar have received 50 kg of gold in last fortnight. “People are coming with even 6-7 kgs of gold and selling them to get instant money. There is a liquidity crunch in the market which is forcing them to sell gold in the market,” said Anish Jitendra Jain, partner, Jugraj Kantilal & Co, a leading scrap dealer in Zaveri Bazar. This sudden rush among public to leverage the rally in gold prices has brought some relief to Chidambaram, who is now perturbed over a falling rupee. Gold traders say that people will unlock more gold in the market if the yellow metal touches ` 35,000 per 10 gm, which is expected by the end of this week.
However, Haresh Soni, chairman, All India Gem & Jewellery Trade Federation pointed that the current situation proves that gold was not the culprit for the ballooning current account deficit and the “turbulence” in the forex market. “On July 22, when RBI came out with its 20-80 principle on gold imports, rupee was trading at 59.60 against dollar. Since then no import has taken place but rupee has further weakened and today it is trading at 68 level.” India’s current account deficit has surged to $88.2 billion in 2012 – 2013.
Extending its Tuesday’s rally, gold prices on Wednesday hit fresh all-time high of ` 34,622 per 10 grams in futures trade on heavy buying as rupee plunged to its new record low of 68.75 against the US dollar. At the Multi Commodity Exchange ( MCX), gold for delivery in October gained further by 910 to 34,622 per 10 grams as against its previous close of ` 33,715. Analysts feel that the rally in gold will continue which is likely to attract more sellers to the market. “As the gold prices have surpassed the previous high of ` 32,464 per 10gms and traversed into an uncharted territory, the short term momentum continues to be supportive for bulls. Also, in the wake of tumbling currency the rally can stretch towards ` 35,000 per 10 gms at domestic bourses in the immediate near term.
At COMEX, however levels of around $1,425 an ounce are still a strong barrier ahead which needs to be crossed for another leg of upside momentum,” said Sugandha Sachdeva, assistant vice president & incharge (metals, energy & currency research), Religare Securities.
Source: Bullion India