Mumbai: Demand for gold in India, the largest consumer of the metal, continued to remain muted on Thursday with prices hovering around record levels forcing buyers to postpone purchases, dealers said.
Gold futures on the Multi Commodity Exchange of India (MCX) was down 0.14%, at Rs19,112 per 10 grams on Thursday afternoon. Prices hit a record high of Rs19,257 on Wednesday.
“The rupee has appreciated a bit after RBI’s rate hike so prices have come down a bit today but demand is weak at these levels,” said a dealer with a foreign bank.
India’s central bank raised interest rates more aggressively than expected on Thursday, keeping up its fight against inflation.
The rupee strengthened to Rs46.29 per dollar from Rs46.35 after the policy reveiw.
A strong rupee makes the dollar-denominated commodity cheaper as it plays an important role in determining the landed cost of the yellow metal, which is quoted in dollars.
“Indian market is preparing for the festive season so demand hasn’t completely gone off but the kind of demand we have seen since the start of the month, that has been dented,” said a dealer with a state-run bank.
Traditionally, demand for gold in India remains strong during the September-November festival season. Dhanteras, considered auspicious day for buying gold, is in November.
International spot gold was steady within striking distance of record highs on Thursday, underpinned by a soft dollar and a generally improving economic outlook.
“The market will take time to digest this upsurge in prices and if prices move in a band of Rs19,200-19,400 demand will start coming back, because at the dealers level the restocking has to happen,” said the dealer with a foreign bank.
A Reuters poll has estimated India’s gold imports in 2010 at 504.5 tonnes, up by 24.5 tonnes from last year.