Gold losing glitter as supplies beat demand

Thursday, June 26 1997

Gold losing glitter as supplies beat demand

Haripriya Srinivasan

MUMBAI, June 25: Good times are ahead for buyers of the precious metal. After the bullish phase in 1996, gold prices are on a downswing now. The downslide in the prices which started several weeks ago is still continuing. Standard mint gold has now fallen to Rs 4,950 per 10 gram, the lowest level in the last three years after September 1994 when it hit a low of Rs 4,610.

There has been a fall of nearly Rs 350 in the last three months. Thanks to abundant supply and slack demand, gold prices have been steadily declining from Rs 4,950 per 10 gm in the first week of March 1997 to its present level. Bullion industry sources say that the decline is likely to continue in the coming months.

Makhanlal Damani, president of the Bombay Bullion Association, attributed the falling prices to the lack of demand in international markets following excess supply of gold. ``If there is low advice in the international markets, then the prices in the Indian markets will be correspondingly low and vice versa,'' Damani said.

There is widespread expectation that the prices are likely to decline further due to the Belgium Central Bank's decision to sell gold. As the price levels in the international markets influence the prices in India more than the demand-supply situation within the country, the scenario is set for further downswing in prices.

Damani denies that there is excess supply of gold in the Indian market. ``There is always a delicate balance between the supply and demand. As per demand, gold comes in from other sources mainly from abroad,'' he says. About 400 tonnes of gold came into the country in 1996. This is expected to go up by 25 per cent to 500 tonnes in 1997.

The international prices of gold have also come down to $338.65 per ounce in London, the major centre of gold trade in Europe. The price was around $ 403 per ounce in January 1996. The weakness in the world gold prices is attributed to reports that Belgium was planning to sell 133 tonnes of gold over a period of five years. The strengthening of the US dollar also weakened gold prices as those holders sold their gold to take advantage of the higher dollar value.