| NEW DELHI/MUMBAI
NEW DELHI/MUMBAI Aug 8 Global price disruptions
will keep Indians, the world's biggest gold buyers, away from
jewellery stores for at least the next few weeks until demand is
likely to rise with the onset of the traditional festival and
Zaveri Bazaar, India's biggest bullion market in the
financial hub Mumbai, drew only a trickle of buyers on Monday as
the country's benchmark gold futures hit a new peak of 25,180
rupees ($562.87) per 10 grams . Gold prices in India
have gained 21 percent so far this year.
In the capital New Delhi, jewellery stores appeared
deserted. Idle employees at one store watched TV news reports
about bullion roaring to record highs after a downgrade of the
U.S. credit rating.
"We had a few people inquire about today's price, but no one
wants to buy now, because they are waiting for some clarity on
whether prices will go down, in which case they would like to
wait a bit," said Sunil Bagga, a manager at a New Delhi store.
"This air of uncertainty is not good. People want prices to
stabilise, even if on the higher side. They want some clarity."
INFLATION, WEAK STOCKS
International spot gold was up 2.5 percent from
Friday at $1,704.19 an ounce by 1135 GMT, having hit a record
$1,715.01 earlier and having traded at all-time highs in
sterling. and euros
While global financial uncertainties weigh on Indian buyers'
minds, persistent high inflation in Asia's third-largest economy
has left little spare cash to buy gold. Small investors have
also been reluctant to take cash out of Indian shares, which
have over five straight sessions on fund selling.
Furthermore, India's gold market is almost entirely fed by
imports and a drop in the rupee to its lowest in nearly six
weeks has also weighed on gold demand. The rupee plays an
important role in determining the landed cost of the yellow
metal, which is quoted in dollars.
"There is buying intermittently, but day-to-day business is
low ... The problem is liquidity, people don't have funds due to
weak stock markets, and even inflation is eating into their
disposable income," said F Choksey, proprietor of Franzi
Rustamji Choksey Jewellers in Mumbai.
"Even sari shops are full of discounts in the next lane, but
there are no buyers ... it has to do with the general
environment of high inflation, interest rates," said Choksey,
referring to the Indian central bank's 11 rate increases since
March last year to keep prices down.
RISE IN DEMAND
Traditionally in India, retail gold demand gains pace from
the month of August when the festival and wedding seasons start,
culminating with the Diwali festival of lights in October.
The jump in prices "has created panic in the market ...
physical players are absent at the moment. I think buying will
come in if prices stabilise for five to seven days," said
Harshad Ajmera, proprietor of Kolkata-based JJ Gold House.
Gold jewellery is an essential part of the dowry basket that
Indian parents give their daughters at weddings.
"I'll wait for a few days," said homemaker L. Ellaboudi, one
of a few customers at a jewellery shop in Mumbai's Zaveri
Bazaar, scanning through glittering necklaces and diamond rings.
"It's an investment that I am making. It's gold at the end
of the day and if it's 25,000 rupees today, it will be 27,000
rupees tomorrow. My grandchildren may have to buy for 100,000
rupees. Even a pair of jeans costs around 7,000 rupees."
Many Indian buyers see the latest spike in gold rates as
price bubble. Some have taken lessons from retail investors who
bought silver bars and coins during the metal's meteoric rise
early this year, only to rue their luck when a rout in May
shaved a third off the metal's value.
"Some sense will prevail in the physical market ... buyers
will react only if there is a $100 (an ounce) fall from here,"
said Gnanasekar Thiagarajan, director with Commtrendz Research
"They'll be forced to return for weddings and festivals."
($1 = 44.735 Indian Rupees)
(Editing by Jo Winterbottom and Jane Baird)