WSJ:Indian Gold Investors Eyeing Further Price Falls
By DEBIPRASAD NAYAK And BIMAN MUKHERJI
NEW DELHI -- Gold investors in India are holding off purchases in anticipation that prices could slide further after a pullback in the past few days, but a pick-up in festive buying is likely in the next one to two weeks as enquiries from dealers have shot up.
Gold fell more than 1% in early Asian trading Friday after five central banks decided to arrange three new dollar-funding operations to stem a liquidity crisis in euro zone banks. Spot gold is at $1,776.40 a troy ounce. International spot gold prices rose to a record $1,920.94/oz on Sept. 6.
"Demand is still a bit slow. People are anticipating that it may fall to $1,700 an ounce," Ashish Mundhra, director of Mundhra Bullion Pvt. Ltd., said. "If it breaks that level, then it could fall further to as low as $1,600 an ounce."
Traders welcomed the price fall, saying it will provide much-needed relief as the sharp rise in gold prices has driven away jewelry buyers in the world's largest gold consumer.
Spot gold prices in India were quoting near 27,400 rupees ($576.8)/10 grams. Local prices have fallen about 5% in the past 10 days.
"I think the demand will come back, as people are waiting on the sidelines. 27,000 rupees is a key [price] level and demand may emerge if prices come to this level," said Ashish Pethe, partner at Mumbai-based Waman Hari Pethe Jewellers.
Jewelry buyers are also going slow on purchases because of the ongoing inauspicious "shraadh" period, which ends on Sept. 26.
Mr. Pethe said that some demand could emerge even during the inauspicious period if prices fall below 27,000 rupees/10 grams.
Demand for gold usually peaks during the festival season, when it is considered auspicious to buy the precious metal.
Rahul Gupta, director of Delhi-based P.P. Jewellers, said jewelry demand is likely to rise during the Hindu festival of Diwali on Oct. 26.
Many people are booking the jewelry by paying a small advance as prices have softened, but deliveries will be taken later.
Girish Choksi, an Ahmedabad-based bullion dealer, said people expect prices to rise sharply from current levels by December, but they are waiting to time their purchases close to the price bottom.
Some traders said prices may reach close to $2,000 an ounce by end-December.
Write to Debiprasad Nayak at debi.nayak@dowjones.com and Biman Mukherji at biman.mukherji@dowjones.com
