By Paul Ploumis 21 Jul 2015 Last updated at 08:33:01 GMT
NEW DELHI (Scrap Monster): The physical gold demand in India failed to pick up even as gold prices plunged to five-year lows. International gold prices had plunged to as low as $1,080 per Oz Monday morning following huge gold sell-off in China. Following the footsteps, MCX Gold Contract for August delivery took a knock, falling to Rs 24, 907 per 10 grams and hitting its lowest level since June 2013.
The sharp drop in prices has not resulted in rise in gold demand in the country. Investors were not keen to purchase gold at lower levels, which indicates that they fear further downside for the yellow metal. In fact, various analysts had warned investors that worse are not yet over for gold. At the same time, there has been a flow of money to equity and other financial instruments that have yielded good returns over the past two years. Moreover, banks and other importing agencies are said to be sitting on huge gold inventory. Consequently, drop in gold prices are unlikely to trigger more gold imports.
Gold, after running through multi-year bull market from 1998 to 2011, started correcting in 2013. The yellow metal has delivered negative returns during the past two years. Meantime, sentiment towards gold is excessively negative. Waning safe-haven appeal of the yellow metal coupled with strengthening US dollar is likely to push gold prices to further lower levels. Further, prospects of US Fed rate hike have made gold unattractive for investments.
According to industry experts, overall demand for gold in India has declined considerably during the initial quarter (April-June ’15) of the current fiscal. Sales are down significantly. The decline in gold prices has failed to boost customer sentiments. Consequently, there has been no improvement in footfalls at many gold jewellery stores in the country.