Indian Gold Demand Plunges, Scrap Inflows Rise

August 24, 2012 at 16:09

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Indian spot gold prices hit a record high on Friday tracking overnight gains in the world market and on a weak rupee, dampening demand and boosting scrap supplies.

“There is hardly any activity in the spot market. Buyers are hoping prices will come down. They are waiting,” said a Mumbai-based dealer with a private bank dealing in bullion.

“Jewellers are cautious. It is difficult for them to judge the impact of price rise and weak monsoon on their festival sales. Besides, they are also getting scrap due to price rise.”

The flow of scrap gold rose as people sold their old jewellery for handsome returns, jewellers said. Gold prices in India have nearly trebled in three years.

India is facing its second drought in just four years, which can drive up food prices and cut spending power, crimping demand for goods from tractors to gold.

The Indian rupee, which determines the landed cost of imported gold, eased on Friday.

Gold imports during the peak demand season of September to December could fall 40 percent on year to 200 tonnes, the head of a trade body said earlier this week.