Gold losses may not be done yet

The bargain hunters who thronged Kumar Jain’s jewelry store in Mumbai as gold prices tumbled in 2013 are staying away for now.

They’re holding off because they think this week’s collapse to the lowest price in five years has further to run, according to Jain. That’s a view shared with Goldman Sachs.

“It hasn’t been anything like what happened two years ago,” Jain said, referring to the rush among buyers across the country in April 2013, when prices tumbled 14 per cent in two days. “There have been some customers buying bullion and people calling to ask me if they should buy now. Prices will fall more and people are waiting for that to happen.”

Bullion for immediate delivery, which slumped to $1,086.18 on 20 Julu traded at $1,093.58 at 4:53 p.m. in Mumbai on Wednesday, according to Bloomberg generic pricing. Futures in Mumbai dropped as much as 1.1 per cent to 24,624 rupees per 10 grams on Wednesday, the lowest level since August 2011.

Gold is mired in the longest run of losses since 1996 as it falls out of favour with investors who expect higher U.S. interest rates later this year to boost the dollar and curb bullion’s allure. Prices could fall below $1,000 an ounce for the first time since 2009, Jeffrey Currie, Goldman’s New York- based head of commodities research, said on 21 July.

While buyers expected prices to rebound in 2013, encouraging them to grab a bargain before they lost the chance, there’s no such expectation now, Howie Lee, an analyst at Phillip Futures Pte. in Singapore, wrote in a report. Asian consumers may also have been hurt by the collapse in Chinese stock markets and weak monsoon rains in India, he wrote.

Buyers in India, the world’s largest consumer after China, may want to see some stability in prices before purchasing the metal, said Mehul Choksi, chairman of Gitanjali Gems, India’s biggest diamond and gold jewelry retailer.

“There hasn’t been any rush to buy and people will wait 15 to 20 days to see how prices behave,” Choksi said by phone from Mumbai on 22 July. “It’s the lean season for demand. For gold, the real demand will start from August-September onwards with the start of the marriage and festival season.”

Bullion is bought in India during festivals and marriages as part of the bridal trousseau or given as a gifts in the form of ornaments.

The slump may still encourage some consumers to hit the shops early before weddings in November and December, Bachhraj Bamalwa, a director with the All India Gems & Jewellery Trade Federation, said on 21 July.

India imported 891.5 tons of gold last year to meet demand of 811.1 metric tons, according to the World Gold Council. Consumption will rise to between 900 tons and 1,000 tons this year, the council estimates.-Bloomberg