Steady prices fail to spur demand

The dealer, who did not want to be identified, saidjewellers in the region’s major gold ornament retailing centres of Madras and Coimbatore, were currently buying about 350 kilograms of gold bars a day, compared with about 760 kilograms in July and August.

"The volatility in prices has come down to about $2 to $3,as against $12 to $13 a month ago, helped by instructions by banks not to hold any open positions at the end of each day on account of the Y2K concerns and so sales are limping back to normal," he added.

India’s southern region accounts for about 40 percent oftotal gold imports.

The country imported 480 tonnes of the yellow metal in thenine months to September 30, 1999, compared with 482 tonnes in the corresponding period last year, a senior official at the World Gold Council, said.

Trade officials said although the recent stability inprices at about $279-280 a troy ounce was a good sign, there was concern over possible oversupply on account of further sales by European central banks and their impact on prices.

"There is still some concern about the European centralbanks and it may not be a surprise if prices again drop below a 20-year low, unless there is a spectacular pick up in physical demand," a leading bullion importer in Madras said.

News that the Dutch Central Bank planned to sell 300 tonnesof gold over the next five years and that the Russian Central Bank had sold about 80 tonnes of gold in November put some pressure on gold last week.

Jewellers said physical demand for gold jewellery, althoughbetter than the dismal festival season sales in October, was likely to increase towards the month-end.

"It’s a little better than the bad Times in October and theyear-end millennium sales organised by merchants should see demand picking up," said Tushar Mehta, a senior trade official in Madras.

Gold demand in India is traditionally high during festivalsand the wedding season that starts in September and continues until the year-end.

But sharp volatility in international gold prices, as theyellow metal rebounded from a 20-year low in late September to touch $340 a troy ounce in early October, hit Indian gold imports and retail sales in October.

Imports through the western city of Ahmedabad, whichaccounts for 30-40 percent of India’s total gold imports tumbled to 2.66 tonnes in October, from 12.19 tonnes in September.

Mehta said demand was likely to stabilise from mid-Januaryonwards, provided the prices did not turn volatile.

"The market should stabilise and see a very gentle growth."

In 1998, the country imported a total of 614 tonnes ofgold, with imports through unofficial channels adding another estimated 10 percent to the total.