The biggest drop in gold prices in nearly seven years wasn’t enough to pull Indian buyers back to stores and they are likely to stay on the sidelines as volatility increases.
Domestic gold prices fell by the most since October 2013 on Tuesday, capping this year’s rally at 33%. Gold has recouped some losses since then, unnerving consumers, who traditionally rush to buy when prices drop. Buyers are much more wary about price swings this year and are holding off buying gold as the economy contracts and coronavirus curbs limit physical movement, according to the All India Gem and Jewellery Domestic Council.
“This big fall has created a suspense among the consumers over whether there will be a further fall,” said N. Anantha Padmanaban, chairman of the trade group. “Consumers had only started coming to the stores in the last 10 days, and now with a correction like this, they may take their time waiting for further fall.”
Demand in the world’s second-biggest user is forecast to slide to a record low this year, hammered by all-time high prices and as the country heads toward its first annual economic contraction in more than four decades after virus-related restrictions shuttered businesses and left millions jobless.
“The market is very volatile right now and this kind of movement reduces consumer confidence in the gold market,” said Vaibhav Saraf, director at Aisshpra Gems and Jewels. “It forces the consumer to step back and wait for the markets to stabilize before investing.”