Gold demand in India, the world’s biggest consumer of the precious metal, may drop 50 percent during this year’s Akshaya Tritiya festival because of rising prices, trading company RiddiSiddhi Bullions Ltd. said.
Demand may decline to 20 metric tons during the festival, compared with last year’s 40 tons, Prithviraj Kothari, director of the Mumbai-based company, said today in a phone interview.
Akshaya Tritiya, on May 16, is considered by India’s 890 million Hindus as the traditional day to buy precious metals. Gold rose to a record today and is heading for a 10th consecutive annual gain as investors seek a haven amid European- debt concerns.
“Demand should be slack because of the high prices and the highly volatile market,” Kothari said.
Bullion for immediate delivery reached a record $1,234.93 an ounce and traded at $1,233 at 12:03 p.m. in Mumbai. Prices have gained 12 percent this year. Futures for June delivery advanced as much as 1.3 percent to a record $1,235.50 on the Comex in New York, taking this year’s gains to 13 percent.
During Akshaya, a Sanskrit word meaning “that which never diminishes,” Indians begin a new venture or buy valuables with the belief it will bring luck and prosperity. Based on the lunar calendar, the date changes every year.
“It’s an auspicious day,” Kothari said. “If prices are high, they buy small quantities.”
In India, gold futures for June delivery rose 1.4 percent to 18,142 rupees ($401) per 10 grams on the Multi Commodity Exchange at 12:18 p.m. in Mumbai. The price climbed to an all-time high of 18,364 rupees on Dec. 3.
Jewelry purchases in India in April and May may be less than a year earlier after prices climbed, Kishore Narne, head of research at Anand Rathi Commodities Ltd., said today from Mumbai.
“It was a too fast, too swift move on the upside,” he said. “Normally in that case people just wait or they postpone their jewelry purchases and expect for some dips to buy.”
Still, investment demand for gold coins and bars is still strong, Narne said. The precious metal may reach $1,300 by the end of the month, he added.
Bullion in New York may reach $1,261 an ounce this month before correcting to $1,185, RiddiSiddhi’s Kothari said. There will be “huge demand” in India should local prices drop to 17,000 rupees per 10 grams, he said.