Gold buying gains pace ahead of Diwali

But Spot Price Falls To Rs 12,155 After Scaling Rs 14k On Oct 10

 THE 'sarafa' markets across the country witnessed some action on the auspicious day of 'pushya nakshtra', when people make new investments or start a new venture.
    Gold prices, which have fallen over the past two days, further supported buying that pepped up otherwise dull sales in the markets. In some cities, such as Udaipur and Indore, sales were in line with the trend of the previous years but in some other places like Ahmedabad and Mumbai, sales were still just half of what was registered the previous year. Pushya nakshtra occurs several times in a year but the one that falls before Diwali is considered auspicious for gold purchase.
    Although the global liquidity crunch, has impacted most asset classes including commodities, gold is still considered a safe bet, despite volatile prices and general economic negative sentiment over the last few months. Demand has been price-driven, and not consistent.
    After touching $909 per ounce level in first week of October, prices are down by 17% to $753. In the domestic markets, the fall has been of the order of 13% since October 10, at Rs 12,155 per 10 gm in the Mumbai physical market due to the weakening of the rupee.
    Bullion dealers and jewellers reckon that prices need to fall further between Rs 11,200 — Rs 12,000 level for demand to perk up. "Gold prices need to go below Rs 12,000 to generate a good demand," said Rohit Choksi, MD, Ishwarlal Harjivandas Jewellers based in Ahmedabad. Mr Choksi said that sales picked up on Wednesday but it is still over 50% down compared to last year.
    Other cities such as Indore in Madhya Pradesh and Udaipur in Rajasthan showed good sales on Pushya Nakshtra. Sumit Anand of Punjab Saraf Jewellers who is also the regional director of Gem and Jewellery Federation Madhya Pradesh said that there was a good rush. Narendra Singhvi who is the president of Sarafa Association of Udaipur said that sales were better compared to last year. "With share markets and property markets crashing people are buying more gold," he said.
    Gold prices took a beating following the strengthening of the dollar and the fall in crude oil prices. With the improvement in liquidity following various governments measures around the globe, investors are selling gold which they were buying earlier as an alternative investment. Amar Singh, head of research at Angel Commodities said that the short term trend looks bearish for gold if dollar remains strong. "Spot gold prices will have a crucial support at $736 as demand is expected to come at low level," Mr Singh said.
    Bombay Bullion Association president Suresh Hundia said that demand for gold will significantly improve at price levels of Rs 11,200. He added that there was some improvement in demand on Wednesday.
    Liquidity crisis hits
    diamond industry hard
MUMBAI: THE global financial crisis has hit the local diamond industry hard. With liquidity drying up, diamond manufacturers are finding it tough to meet their commitments for buying rough diamonds from mining companies abroad. As a result they could lose their licences to acquire the rough diamonds from these companies, reports Maulik Vyas. India is the largest importer of rough diamonds in the world and Indian companies specialise in exporting the stones after polishing them. Local diamond companies import rough diamonds worth over Rs 40,000 crore per annum under "site holding agreements" with the mining majors under which they are required to purchase all the rough diamonds that are excavated from a particular mine. If the Indian companies fail to purchase the diamonds, they stand to loose the raw material procuring contracts. Concerned over the possibility of the companies losing their licences, the diamond industry body has written to global mining majors asking them to reduce their supply of raw material till the situation improves. The Gems and Jewellery Export Promotion Council (GJEPC) has written to mining majors like DTC, Rio Tinto, Alrosa, BHP and Aber recently. "If mining companies continue to supply, the manufacturing companies have to buy it as per the terms of the contract and in the current scenario, Indian companies will find it difficult to pay up. But if the miners cut supplies, Indian manufacturers, reeling under a liquidity crunch, benefit without losing the rights over a mine," said GJEPC chairman Vasant Mehta.