Despite the rise in price, Bangalore City witnessed brisk gold sales as the marriage season is in full bloom. The price of the precious metal in the City touched a high of Rs 1,735 per gram on Tuesday.
Many jewellers were certain that the sales would remain normal as long as the season lasts. The gold price was Rs 1,727 per gram on Monday.
Some jewellers felt it would go even higher next month. “The prices will continue to rise. But nobody knows when the bubble will burst. Right now, it looks like the high prices are manipulated,” said Nazeer Ahmed, proprietor of a jewellery outfit near MG Road.
The mushrooming of several jewellery establishments in the City, with the continued buoyancy of the traditional shops, has made the market intensely competitive. “Some new jewellery chains have opened shops assuring customers prices that are 10 per cent lower than the others. Customers are also promised that there will be no wastage, and no making charges. Ten per cent makes quite a difference,” said a jeweller.
During the marriage season, the demand is more for gold jewellery with lucky stones. Ordinary people might rethink on purchases at high prices, but for the marriage they would have no choice,” explained Vilayat, who runs VH Gems and Jewels. Most jewellers are convinced that competition would give the buyer more benefits soon. “It is turning into a buyers’ market,” said a shop owner.
Even in the futures market, the yellow metal touched Rs 18,750 for July 10 delivery, up nearly 2 per cent, as global investors made a beeline for bullion in the wake of the euro crisis that has made investments in sovereign securities risky.
“The rise is because of the European crisis, as the perception of the investor community that gold is a safe bet,” said Jagannadham Thunuguntla, the equities head for leading brokerage firm SMC Capital.
“All the money chases gold. Till such time this fear over the European financial crisis looms large, we will see gold in much demand. There could be corrections, since the rise has been too fast. But the trend will be upward,” Thunuguntla said.
According to the London-headquartered World Gold Council, which recently released its outlook for the remaining part of this year, the demand for the metal in India and China will continue to grow, driven by jewellery demand in spite of high gold prices.
“In the first quarter of 2010, India was the strongest performing market as the total consumer demand surged 698 percent to 193.5 tonnes. In China, demand proved resilient, as it increased 11 per cent to 105.2 tonnes,” said the Council.
According to analysts, the surge on Tuesday followed a warning by the European Central Bank on Monday that euro zone banks faced up to $235 billion in potential loan losses due to the ongoing global financial crisis.
Gold prices have seen a rather steep upward swing since 2007 when the retail price of the metal per 10 gram was Rs 10,800. Since then, the prices have risen at an average of as much as 35 per cent.