(Bloomberg) -- A rally in gold prices to an all-time high in India is deterring local buyers in the runup to what is normally a key demand period next month, according to the World Gold Council.
Gold futures in the second-biggest consumer jumped to a record 60,455 rupees ($734) per 10 grams last week. The metal has risen about 15% in the past year in India because of haven demand and a weakening rupee. The country imports almost all the gold it uses, mainly from Switzerland and the UAE.
“People tend to wait and watch, and they want to be sure that this is not a blip and that prices will continue to rise,” said P.R. Somasundaram, regional chief executive officer for India at the London-based council. If prices steady around current levels, demand may return for the key buying day of Akshaya Tritiya in April, but continued volatility will force people to stay away, he said in a Bloomberg Television interview.
“They will probably wait for the monsoons and the fourth quarter,” when there are key festivals like Diwali, he said. The stock markets have turned a little attractive now for long-term investors so that will be a headwind for demand if prices continue to rise, he added.
In addition to record local prices, a high import tax is also making smuggling attractive. “We can clearly see that the cash market is at a discount so activity has increased tremendously” in the wake of Covid, said Somasundaram.
--With assistance from Haslinda Amin, Rishaad Salamat and Anand Menon.
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