High prices to deter heavy gold-buying

an auspicious time to splurge on the metal, experts say.
Gold demand is expected to be moderate, they said, as the country’s middle-class, struggling to cope with high inflation and rising fuel and food prices, may not have enough spare cash or savings to buy the yellow metal.
Gold jewellery showrooms around Mumbai’s Zaveri Bazaar, which was hit by a deadly bomb attack in July, have remained half-empty during the festive season.
India is the world’s biggest importer and consumer of gold, with the country accounting for over a third of global demand.
On top of that the yellow metal is traditionally seen as a hedge against inflation, which in India is approaching double digits. But with rising costs, Indians have become price sensitive consumers, looking to buy gold on price falls instead of waiting for a religious festival or wedding, analysts said.
Some, who like garment trader Dinesh Kapadia prefer buying gold coins and bars as an investment, are not planning to purchase gold at all this Diwali.
“Prices are too high. I will wait,” he told AFP, adding that he expected prices to correct further later this year.
Gold prices surged this year on frenzied buying by investors, large funds and central banks around the world in the aftermath of a US sovereign debt downgrade and plunging global equity markets.
International gold prices reached a record US$1 920 per ounce in early September and while they have since slipped they still remain up 15 percent from the start of 2011.
The precious metal, whose key drivers are investment and jewellery, is widely seen as a safe haven in difficult times, but analysts say a combination of factors is keeping demand weak.
Indians bought 540 tonnes of gold in the first half of 2011, up 21 percent from the same period last year, according to data from industry body World Gold Council. – AFP.