Could Indian housewives be calling the top of the gold market? Many are selling unwanted jewellery into a booming recycling market and deferring all but essential purchases of the precious metal, commodity traders, economists and jewellers said on Wednesday.
India is the world's largest consumer of the precious metal and the apparent sell signal from its value-savvy householders may prove unsettling for global investors hoping that gold will continue to be a safe haven in volatile markets.
"Demand for gold is virtually zero," said Suresh Hundia, president of the Bombay Bullion Association. "People are taking profits and selling their gold back to jewellers for 2.5-3 per cent less than international market prices."
As the gold price has soared to record highs, imports have come to a near standstill, tumbling 70-80 per cent in the last month, according to Mr Hundia. Economists estimate that gold imports in the last quarter of 2007 could have been 20 per cent lower than in the same period the previous year.
"Price volatility is always bad for jewellery demand," said Jill Leyland, chief economist at the World Gold Council. "The Indian housewife would be cautious at the moment, waiting for prices to settle before returning to the market."
The price of gold reached another high on Monday, hitting $914 a troy ounce (31.1 grammes) in intra-day trading, but fell back to $874.20 on Wednesday. The metal has risen more than 40 per cent in value since the start of 2007.
Kamal Motiyani, a jeweller in Sarojini Nagar Market, a bustling middle-class shopping district in south Delhi, said his sales of new jewellery were "down 30-40 per cent in the last 10 to 15 days".
At Tribhuvandas Bhimji Zaveri, a jewellers on Janpath, one of the most prestigious shopping streets in the capital, business is also slow. "According to Indian custom it is mandatory to buy, but sales are 50 per cent down," said P.N. Sharma, a salesman.
Spending on jewellery represents close to 75 per cent of India's total consumer demand for gold, some 722 tonnes in 2006, according to World Gold Council figures.
Citigroup economists say the breaching of the psychological Rs10,000/10gm level may explain the sudden loss of appetite for the metal. February gold contracts were yesterday trading at Rs11,213/10gm on Mumbai's Multi Commodity Exchange on Wednesday.
Indian stocks of 13,000 tonnes account for about 9 per cent of the world total, according to MCE. Gold is the second preferred investment after bank deposits.
BHP Billiton, the Anglo-Australian miner, handed over this week the gold, silver and bronze for the Beijing Olympic and Paralympic Games, writes Toby Shelley in London.
It is donating 13.4kg of gold, valued at some $384,000 (Euro260,000, £195,000), along with more than one tonne of silver, worth some $690,000, and almost seven tonnes of copper.