The recent decline in bullion prices has spurred a renewed interest in gold investments, as both consumers and investors take advantage of lower prices. Over the past week, international gold and silver prices have dropped by nearly 3% and 7%, respectively, prompting increased activity in the domestic market.
Gold prices on the London Bullion Market Association (LBMA) have fallen below $4,000 per ounce from $4,111, while silver prices have decreased to under $55 per troy ounce from $59.6. In India, the impact has been somewhat cushioned by a depreciating rupee, which has fallen more than 1% against the US dollar, leading to a milder sell-off at the Multi Commodity Exchange (MCX) where gold and silver prices have dipped by about 1.5% this week.
The domestic market has seen gold trading at ₹1.41 lakh per 10 grams, with silver prices down to ₹2.16 lakh per kg, compared to ₹2.17 lakh per kg a week ago. This price correction has driven a 25% increase in consumer inquiries and store visits in July, as noted by industry executives.
“The rupee has come under mounting pressure as crude oil prices resumed their climb following renewed hostilities between the US and Iran. At MCX, gold and silver have fallen by almost 1.5% this week.”
Renisha Chainani, head of research at Augmont Gold
Investors are capitalizing on the favorable risk-reward ratio of gold, with strategic buying through exchange-traded funds (ETFs) on the rise. Gold ETFs saw net inflows of Rs 3,443 crore in June, reversing the previous month's outflow. Meanwhile, silver ETFs attracted Rs 4,286 crore in June, despite a cautious investor sentiment.
Portfolio managers are reportedly reducing their exposure to silver, which has seen a 1% decline over the past week, reflecting a shift in investor sentiment. Gold continues to be favored as a core portfolio asset, offering a hedge against market volatility.
“Not only consumers, but investors as well are looking at gold because the risk-reward ratio at this point appears very favourable. Even if an investor loses 5-7% in the near term, the upside could be much higher once gold prices start climbing again.”
Surendra Mehta, national secretary, India Bullion & Jewellers Association
Background
The recent geopolitical tensions, particularly between the US and Iran, have contributed to the volatility in bullion prices. As crude oil prices climb, the rupee has weakened, affecting the domestic bullion market.
Investors and consumers alike are closely watching market developments, with many opting to secure gold holdings in anticipation of future price increases.
