Wonder why gold prices are high despite poor demand?

The demand for gold is traditionally low during the monsoon season. Yet, investors are investing heavily in gold and trying to maintain the price level, in the absence of physical demand in the jewellery market, by holding on to the yellow metal, reported market experts.

In fact, most investors are doing this through paper gold. Paper gold is an investment in bullion on the lines of shares, and it impacts the price of the yellow metal. As a result, investors are trying to maintain the price so they don’t suffer losses.

During the peak season when the actual demand will go up, the investors will make profits, as the price would then move upwards,” said Kumar Jain, vice president of Mumbai Jewellers Association and owner of Umedmal Tilokchand Zaveri at Dagina Bazar in South Mumbai.

Pankaj Bafna of Bafna Jewellers at Dagina Bazar also agreed with Jain. He said:“Investors hold on to paper gold till the festival or marriage seasons, when the demand goes up and sell it to make profit.”

The Bombay Bullion Association members too agree that there has been huge investment in gold; however they differ on the mode of investment.

“They are investing in gold because returns are high and it is safe,” said Prithviraj Kothari, president of Bombay Bullion Association (BBA). He added that currency fluctuation is one of the factors diverting investors towards gold.

Interested to know more about the stability and trends of gold pricing? Join us at Commodities Week Asia 2013 and hear from keynote speakers on the insight and growth of gold industry.