MUMBAI: Amidst the stock market mayhem, gold saw a volatile patch on the back of low wholesale demand due to the high rates in the domestic market.
The sharp fall in the rupee against the dollar earlier in the day saw India’s wholesale demand dip further. The rupee, however, recovered to 39.55 later on Wednesday. Retail demand, though not booming, was slightly better than wholesale demand, traders said.
Indian rupee depreciated earlier in the day tracking SEBI’s proposal on Tuesday for curbs on the flow of foreign funds into shares through participatory notes.
On the retail front, moderate buying continues to be seen on account of the ongoing Navaratri festival. Bombay Bullion Association president Suresh Hundia said, “Demand is still poor, and offtake is about 300 kg a day currently in the wholesale market. This is much less than the usual demand of a tonne a day during this period. Retail demand is also not very much higher.”
In the international markets, gold came off Tuesday’s high of $766.60 a troy ounce. India is a major importer of gold and a weaker rupee against the dollar makes gold more expensive. Some analysts, however have indicated that gold could come off the high levels and a sharp downwards correction is due. Gold has risen close to 20% since the beginning of the year.
The World Gold Council (WGC), in the meantime, has lowered its prediction regarding India’s gold consumption this year by 15-25%. The initial forecast stood at 1,000 tonne but high gold prices are weakening demand for the precious metal. The current forecast is between 800-900 tonne. The upcoming wedding season and Diwali festival in India are expected to increase demand.
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