Indian citizens flock to buy gold, taking advantage of sell-off

As gold prices plunged over the last several days, Indian citizens are taking advantage of this tremendous buying opportunity and are rushing to acquire the yellow metal. With the decline in prices, it is believed the federal government will be helped with its finances because of higher costs of gold imports.

Indian gold imports are projected to rise to about 900 metric tons this year because of the drop in gold prices. The decline has reinvigorated consumer appetites, especially considering that the Indian government imposed a two percent tax hike on gold imports from four percent to six percent. Jewellers warned that the duty hike could increase retail jewellery prices by two percent, or 600 INR ($11.15), per 10 grams, therefore decrease sales.

“It’s been nearly two years since people have been getting such low prices, so those waiting for more favorable buying conditions are now coming forward,” said RiddiSiddhi Bullions Managing Director Prithviraj Kothari, in an interview with the Wall Street Journal.

Gold imports have been diminished by 25 percent this year, but this month’s trading action may give them a strong boost.

Last week and on Monday, gold dipped from close to $1,600 all the way down to $1,350. It has slowly been itching towards $1,400. Although institutional investors are urging everyone to sell, goldbugs and bargain hunters (and now Indians) are buying vast amounts of gold. As Peter Schiff, president of Euro Pacific Capital, espoused over the weekend, “This may be the last great buying opportunity.”

The World Gold Council (WGC) reported that gold imports hit 860 tons last year in India. Prior to the gold market tumbling, industry experts believed 2013 figures would be similar to last year’s.

Per 10 grams of gold is valued at 26,000 rupees ($482.20), up from 25,400 rupees Monday (here are city gold rates). The strong demand has been supported through jewelry and with the marriage season in the air gold is the usual gift. Nearly three-quarters of Indian gold demand is related to jewelry. This has led to jewelry businesses to extend operating hours.

Even with these gold prices that haven’t been seen in two years, customers are still cautious as to whether or not they should buy more gold because they fear gold prices could drop even more.