Gold firm, demand slows as dips eyed

29 Aug, 2008, 1717 hrs IST, REUTERS
MUMBAI: Gold prices firmed up on Friday, slowing down the momentum of purchases, but dealers said dips could rekindle demand as consumers' appetite remained strong in the festival season.

"Demand is slowing down and coming down to being regular," said Bhavesh Soni, partner at Kunal Jewellers, a jewellery wholesaler in Ahmedabad. "That is because many people bought in a rush in the last 10 days."

Gold was higher on the back of a firm overseas market that traded near its highest level in more than two weeks as crude oil rose on storm fears and the dollar slipped on oil supply worries.

Gold generally moves in tandem with crude oil as the latter signals inflation, while the metal negates it. But the metal has an inverse relation with the dollar as the two compete for funds.

Despite the slowing demand, supplies continued to be delayed and premiums high, dealers said.

In Lucknow, banks took up to 15 days to deliver gold and local traders charged a premium of up to 80 rupees per 10 grams, said Pankaj Agarwal of Brijwasi Traders & Bullions Pvt Ltd, a large wholesaler.

Agarwal said the appetite of the market still remained high and more buying could be seen at dips.

"People fear prices could go up to 14,000 rupees per 10 grams in October," he said.

India's demand for gold will peak in October when festivals and salary bonuses induce consumers to buy gold.