Monday, May 02, 2005

High India Gold Prices and Wedding Demand

Reuters has run a story titled High India gold prices dampen wedding demand. A gold trader told Reuters, "gold buying in the western city of Ahmedabad, the India's top market, have dwindled to 800 kg a day from more than 1,000 kg a year ago, while in Bombay they have dropped to 400-500 kg from about 700 kg."

The report goes on to say "Gold demand is good at present but not as good as last year," a bullion dealer based in the southern city of Madras told Reuters.

"Demand in Madras, India's fourth-biggest market, has fallen to about 200 kg a day from 275-300 kg a year ago." Gold Bullion dealers told Reuters.

Bill Murphey from GATA.ORG points out this report fails to note that early May last year world gold prices were falling to the 2004 low in the $370s, having reached the $420s in April. Murphey says that India in other words, was conducting one of its periodic gold buying sprees which occur when the world gold price drops suddenly. Murphey says in perspective, it is surprising demand is so robust, comparatively, this year.

"Gold traders said many gold jewellers were maintaining below average gold inventory as they considered current gold prices too high." People thought gold prices will also fall the way silver price has dropped, but that has not happened so far," Girish Choksi," a bullion dealer in Ahmedabad told Reuters

Murphey says this indicates solid Indian gold buying will continue.