Mumbai: Demand for gold in India, the world’s biggest consumer, stayed subdued on Friday after prices moved higher tracking a similar trend overseas and as poor monsoon rainfall slashed purchases in key southern markets.
The most active gold for October delivery on the Multi Commodity Exchange (MCX) was up 0.24% at Rs 30,172 per 10 grams by 2:57pm, not far from a record high of Rs 30,428 hit in June.
Gains were capped by a rise in rupee, which determines the landed cost of imported gold.
“Unless we see significant correction in prices, demand is likely to remain sluggish,” said a Mumbai-based bullion dealer with a private bank.
“Retail sales of coins and bars are very weak. Interest of investors is eroding as they are not expecting significant rise in prices.”
International spot gold extended gains from the previous session, when it rose the most in two weeks on German Chancellor Angela Merkel’s support for more action by the European Central Bank to fight the bloc’s debt crisis.
Gold demand in India is likely to fall by a fifth in the second half of 2012 from a year ago on higher prices and as weak monsoon rains hurt incomes of rural households, a senior World Gold Council (WGC) official said on Thursday.
India is facing its second drought in just four years, which can drive up food prices and erode spending power, crimping demand for goods from tractors to gold. More than half the population relies on the rural economy.
Investment and jewellery demand from Indian consumers plummeted 38% to 181.3 tonne in the second quarter of 2012.
Festival season began last week in India and will peak in November. The wedding season will also unfold during the period.