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Wedding bells bring the glitter back

Dilip Shah

Gold prices in the Indian bullion markets bounced back in the week after an early slide thanks to a pre-wedding season demand.

For traders this was a welcome sign since the demand for gold during Diwali was low courtesy a record rally of prices.Says Mukul Sonawala, president, Bombay Bullion Association. "We are now receiving a robust demand for the upcoming wedding season in India" he said. The wedding season begins in December and will last up to summer next year.

Earlier in the week, 24-carat gold fell to Rs 4,600 per 10 grams from Rs 4,650. Later it climbed to Rs 4,620-4,630. Likewise, 22-carat gold initially fell to Rs 4,255 from Rs 4,300 and then went up to Rs 4,275-4,280. The price of a gold biscuit fell to Rs 53,900 from Rs 54,500 but later on recovered to Rs 54,200-54,300 per piece during the week.

Prices in the global markets climbed from $ 289-$290 per ounce to $ 298-$299 caused by market rumours that the Bank of England was not going to auction of a part of its gold reserve on November 29. However, it dropped to $ 293-294 per ounce when the Bank refuted any such move. In a statement the Bank stated that it will auction 25 tonnes of gold from its reserve as per schedule. Earlier, the Bank of England had sold 50 tonnes of gold in the last two auctions held in July and September 1999.

"At present the $287 level for gold is a strong support level.If it is broken, gold prices will crash," commented an analyst.

According to the World Gold Council, the demand for the yellow metal in India rose by 38 per cent during July to September 1999 and climbed to 241 tonnes. Out of this about 180 tonnes of gold has officially been imported in India.

However, the rally in September and October has kept overseas arrivals at a low-ebb. Gold import in India fell to 40 tonnes in September and to 10-15 tonnes in October. "The stability in the prices will now activate demand and may bring in more overseas arrivals of gold in November and December," Sonawala said. India's forex reserve has shot up to $34 billion (an all time high) after the recent buoyancy in the gold prices and revaluation of the gold reserve.

India's oil import bill has risen to Rs 54,000 crore, following crude oil price's rally to a three-year high in the world market. The rise in the oil import bill and the ensuing higher deficit in the oil poll account may put pressure on the value of Indian rupee against dollar. "Any fall in the rupee value will push up the import cost of gold" said Dinesh Parekh, director, Bombay Bullion Association.

The demand for gold globally has gone up by 22 per cent to 877 tonnes in the third quarter of 1999, a new record for any three-month period. A booming US economy and an activated demand for millennium gifts has lifted diamond sales as well.

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