Gold surge does not deter Indians

Indian retail gold buyers are stepping up their jewellery orders for the festival season, despite prices of the precious metal hovering at near 16-month highs.

Jewellers said spot gold prices of around $714 an ounce were not going to deter purchasers, with the festival of Ganesh Chaturthi starting on September 15.

"Customers have already placed a good amount of orders before the start of Ganesh Chaturthi," said Rajiv Popley, director of Popley & Sons in Mumbai, referring to upcoming birthday celebrations of the elephant-headed god of wisdom and prosperity.

He said most customers were paying half up front and were likely to complete the transactions on the day of the festival itself.

"The figure of $700 is not a deterrent for Indian buyers. I don't think it will dampen the season in any manner," Popley said.

He added prices in the local market were below 9,500 rupees ($235) per 10 grams, which was below last year's level of 10,000 rupees at the same time.

"We are still far away from that level," he said.

India's peak festival season commences with Rakhi, which celebrates the bond between a brother and sister, held at the end of August, and culminates with the festival of lights, Diwali, in November
It is traditionally considered auspicious to buy gold during these festivals.

Narendra Singh Rathore, Ahmedabad-based proprietor of Raju Bhai Kiran Jewellers, said he expected the buying trend to be good so long as the gold prices stabilised at close to $700.

"If it goes beyond $700, then it will impact the demand. It is important that it should stabilise," he said.

But a Chennai-based bullion analyst said the bullish trend in prices could stoke demand, rather than cool it.

"When the prices are going northwards, everybody will jump into the gold market," said N. Prasad. "On the contrary, there is hesitation in buying during bearish phases."

Demand for gold in India grew nearly 71 percent during the first half of the year to 387 tonnes from 227 tonnes during the same period of 2006, according to the World Gold Council.

Prasad said he saw Indian gold prices rising by 300-400 rupees during the festival season with the U.S. Federal Reserve expected to cut interest rates next week and a rise in oil prices above $78 a barrel.

But added the rise in gold prices would be in part cushioned by a strengthening rupee against the dollar.

The Indian rupee is quoting at nearly 40.5 rupees to a dollar, compared with above 45 rupees at the same time last year.

Via Reuters