India's gold prices hovered near the psychological Rs 16,000-mark, attracting more scrap sales on Tuesday as consumers chose to cash in on the rally in the yellow metal, while imports continued to slacken.
"There are sellers exchanging for marriage purpose," said Daman Prakash, director, Chennai-based wholesaler, MNC Bullion, adding, "People are seen exchanging their old gold for new designs."
"Around 40 people have lined up outside my shop to sell," said Jitendra Kantilal Jain, partner at Mumbai's Jugraj Kantilal and Co, which buys scrap gold. Kantilal said that he had already collected around 100 kg of gold in scrap last week.
The benchmark April gold contract was 0.37% lower at Rs 15,829 per 10 gm at 1.40 pm on profit-taking, after hitting a record high of Rs 16,040 last week. But a weaker rupee limited the downside. The rupee impacts gold prices as most of the metal is imported in India and paid for in US currency. However analysts are still bullish in the short-term on a contracting US economy and expectations of a weak rupee. "Consumers, who are interested in selling, may wait as prices are expected to harden further," Prakash added.
Domestic gold demand was slack as buyers were deterred from fresh purchases with prices near record levels, traders said. The inflow of scrap has curtailed demand for new imported gold bars, buyers said. "It's almost three months now and there have been no buyers," Prakash added. Traders said that local gold was available cheaper by 1.5% than bank gold, signifying profit-taking by traders on their old stock. "If gold crosses $1,000 (an ounce), then the discount may rise to 3.5%-4%."
"No gold has been imported into India so far in February because prices are at record highs in rupee terms," the head of Bombay Bullion Association (BBA) said on Friday.
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