Wednesday, April 20, 2011

Indian Physical Gold Demand Weakened But Still Evident

According to a Reuters report webbed by the Economic Times, gold's climb to $1,500 has weakened traders' demand for the physical product but has not extingushed it.
"Traders are uncomfortable at $1,500 (an ounce). I booked for about 30 kgs from morning at $1,499-1,501 (an ounce)," said a dealer with a state-run bullion dealing bank, adding "I have advanced orders at $1,500-1,498."
A stronger rupee helped cushion the rise for buyers.

Evidently, traders can't stand on their inventory any more as the Akshaya Tritiya approaches. That festival, on May 6th, typically induces a lot of retail buying as buying gold then is supposed to bring prosperity.

[Frankly, it's hard to argue against the custom from a practical point of view. Purchases for previous festivals have brought prosperity for the last ten years with respect to the gold component, and rising inflation had brought prosperity in other ways for farmers. As for city dwellers, who tend to be less swayed by tradition and ritual, they've gotten their share thanks to India's booming economy.]

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