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High prices keep gold buyers away

February 11, 2009 13:33 IST

A walk down the crowded Big Bazar area, the bustling bullion market of Berhampur city in south Orissa, during business hours usually witnesses hectic activity. Nowadays, however, the scene is different. Zooming gold prices have kept customers away from the gold market even during the wedding season.

While 22 carat gold now costs around Rs 13,600 per 10 grams, gold of 0.99 fineness touched Rs 14,550 per 10 grams on Tuesday.  The price of gold jewellery is a notch higher as traders charge Rs 100 per gram as making charge and collect 1 percent value added tax on the sales.

The price of the yellow metal, which touched around Rs 14,500 per gram last week, came down to Rs 13,600 on Tuesday. Despite this marginal fall, prices are still considered high and beyond the reach of many low and middle income families.

"Despite the marriage season being on, almost all gold ornament shops in Berhampur have reported a sharp fall in their sales," said P Satya Narayan Senapati, president, Berhampur Jewellery Association. At the peak of the marriage season, the gold trade in the city reached around Rs 1 crore (Rs 10 million) per day earlier. While there are 102 members in BJA, several others are also engaged in the gold trade outside the BJA fold.  

Given the uptrend and volatility in the price of gold, there is scanty demand for the yellow metal and only need-based buying by the customers, Senapati said. "It is not surprising that prospective buyers are waiting for the price to come down, if there is no urgency to buy," he added.

"As of now, the gold price is on an ascend graph with the sales dipping proportionately," said another gold trader. An interesting aspect of the current trend is that while sales have dipped abnormally, the release of gold by people has also not been reported on a large scale.

"Normally, at such high rates, a lot of old ornaments and scrap come in for re-making, but what we see now is that very few people are coming to sell their old-ornaments," said Nageswar Saubudhi, a trader.  A majority of people, especially those not well versed with the share market, buy gold as an investment option and do not do speculative trading. "Hence, we don't find many people trying to sell gold when the prices have shot up," said another jeweller.
Hrusikesh Mohanty in Kolkata/ Berhampur
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