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Wednesday, 18th January 2006 (5620 views)

Indian consumers are staying away from gold jewellery after several price increases, according to the Economic Times of India.

The newspaper said that despite the favourable exchange rate between the rupee and the dollar, the high price for gold is keeping ordinary customers away from the metal in jewellery shops.

However, analysts are confident that once buyers are acclimatised to the new costs they will return to the market. Tuesday's high of $565 an ounce translated as 8,050 rupees in India's largest bullion market Mumbai.

Rajesh Mehta, managing director of Rajesh Exports, said to the newspaper that the current price was certainly affecting the jewellery industry, but that the customers would come back once the prices have been around longer.

However, bullion banks have also been irked by the performance of gold.

Analyst Bhargava N Vaidya said that bullion buyers had been discouraged by the prices, whilst a spokesperson for Corporation Bank said that sales had decreased.

The issue may also have a knock on effect for the diamond industry, whose growth may be slowed down by the changes.

 

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