Prices drag as Zaveri Bazar ushers new Samvat, but sellers are optimistic

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While Samvat 2075 began on a dull note on the price front, sellers in Mumbai's Zaveri Bazar were nevertheless optimistic that demand would improve, going forward, and would push prices upwards. While traders in the physical market were willing to buy large quantities at lower prices, importers were not ready to sell. Physical gold changed hands during muhurat trading in Mumbai’s Zaveri Bazar on Thursday, in a large hall owned by the Indian Bullion Jewellers Association (IBJA). In trading circles, this known is knwn as the ‘ring’, and is akin to the stock market ring of days gone by. 

The deals took place on the basis one-to-one discussions. In an unusual move on muhurat trading day, importers were offering limited quantities of the metal at lower prices as they expected prices to move higher. On the last day of the previous Samvat, standard gold closed at Rs 31,960 per 10 grams and yesterday, the first day of the new year, it traded almost 2 per cent lower.

Many importers offered limited quantities at the opening price of Rs 31,281 (muhurat trades are executed at prices ending with the digit 1). But larger quantities were commanding a higher price. Officials conducting ring said that the optimism on price and demand prompted sellers not to offload at whatever price they got, even though there was considerable demand.

And on Friday, gold (including standard gold) closed at yesterday’s trade price of Rs 31,281 per 10 grams, even as the metal fell in the international market, following an indication from the US Federal Reserve of a strong possibility of a rate hike in its December meeting. In the recent past, when the metal fell below $1,200 an ounce, several central banks bought it for forex reserves, stemming its decline in the process.

There are reasons for the optimism on the price front.

GFMS Refinitiv (earlier Thomson Reuters), an independent research unit, said in its Gold Survey for Q3 released today, “With early signs of professional (investor) interest in the market, plus improvement in grassroots retail activity, we believe that there is scope for further price appreciation. Global central banks’ buying has given gold some support above $1,180 and this is leading short-side traders to lock in profits. There is little appetite as yet for fresh longs, however. We are looking for a fourth quarter average of $1,224, leading to an annual average for next year of $1,285.”

Interestingly, there was another consumer-friendly change that took place on Diwali in the domestic market -- IBJA started issuing indicative retail gold prices across various carats via SMS, on receiving a missed call on a dedicated number.

So, while 22 carat gold of 916 purity, from which jewellery is made, closed at Rs 28,791 per 10 grams in the wholesale market, IBJA's indicative price of that variety for retailers was Rs 30,420. 

Surendra Mehta, National Secretary, IBJA, says, “This facility was well received by consumers who can check with IBJA  on rates. Since consumers can now approach retailers with a price, this has induced competition. For purity they have an option of asking for hallmarked jewellery. This means price and purity protection are offered to consumers irrespective of the brand.” Mehta said ever since the service was launched, IBJA has been receiving 5,000 missed calls a day. On launch day alone, its Facebook page got 5,000 likes.

However, the IBJA price is not binding on branded jewellery, which can still command a premium on design, making charges and other services.

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