Capital Gold Group Report: Huge Demand for India Gold — Investors Buying in the Dips

Thursday July 24 2008 15:32 IST

MUMBAI: India‘s gold prices eased further on Thursday as weak crude oil eroded the value of the metal as an inflation hedge, and local buyers reacted with heavy purchases, dealers said.

“There is a huge demand… in the last couple of days alone 10 tonnes may have been sold all over India,” said Prithviraj Kothari, director of Riddisiddhi Bullions Ltd.

Foreign gold, that guides the local market, rebounded from a two-week low on bargain hunting as crude oil stabilized after steep drops from its all-time highs this month.

Gold generally tracks crude oil as the latter signals inflation, while the metal negates it.

Investors, women and jewellers were thronging Zaveri Bazaar to buy gold, said Jitendra Kantilal of Jugraj Kantilal & Co, a prominent trader in Mumbai’s Zaveri Bazaar.

“They are buying coins and bars… mostly 100 gram bars for investment,” said Kantilal.

But consumers haven’t given up hopes of more dips, said D.P. Naresh, a wholesaler in Bangalore.

“There is a lot of appetite for prices at lower levels,” said Naresh. “At $915 an ounce, there would be huge interest.”

India‘s lean season for gold purchases is set to end in another month after which festivals and weddings are expected to spur demand for the yellow metal.

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