Indian Gold Demand Muted as Rupee Drops to Record Low

May 22, 2012 at 13:52

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Demand for gold in India, one of the world’s top consumers, stayed muted on Tuesday after prices in the local market rose as the rupee fell to a record low, increasing the cost of imports.

“Rupee is a big negative factor. It is not allowing local prices to move in tandem with world market,” said a Mumbai-based dealer with a state-run bank, which imports bullion.

The rupee plays an important role in determining the landed cost of the dollar-quoted yellow metal. The rupee hit record lows for the fifth straight session, hurt by large dollar demand from oil firms and a weak global risk sentiment.

“Retail demand has gone down and jewellers are waiting for correction. They may buy significantly if prices dip below 28,000 rupees,” the dealer said.

The wedding season is underway in India, the world’s biggest buyer of the yellow metal, and will taper off by the end of the month. The festival season has already ended.