Boom in Gold demand over, prices under pressure

MUMBAI: Is the crumbling stock market a bad omen for the booming bullion/gold market in India? It looks so, and analysts said on Wednesday that gold prices could come drastically down, if the current stock market mood is of any indication.

The Bombay Bullion Association said that gold sales in India--the world's largest consumer of the yellow metal--have fallen for the month of January, thanks to high prices and volatility in the stock markets.

According to the Association, gold imports to India in January came down to five tons from 62 tons a year earlier, as higher prices sapped demand.

Varun Mehta, a gold trader and analyst, said that the boom that the gold market has been witnessing in the last few months seems to be over. "Gold prices have been going up to such high levels that even people now find it difficult to buy the yellow metal even for auspicious functions like marriage," he said.

"Gold prices in India are under tremendous pressure. Traders feel gold prices would come down from these high levels," he said.

Analysts like Mehta feel that if gold prices crash in India, it would naturally hit the bullion prices global as India continues to the largest consumer for the yellow metal.

In a comment to Reuters, George Nickas, broker with FC Stone in New York, said that sharply reduced gold jewelry demand from India would weigh on bullion, although the market could be sustained by investors buying gold as a safe-haven investment.

"People who are buying gold are the high net-worth individuals, and people who are selling it are people who are trying to survive the (weaker) economy. It's unclear where gold is going to go in the near term," Nickas told the news service.

Gold fell to $907.70/908.50 by New York's last quote at 2:15 p.m. EST from $922.70/923.40 the previous day. It traded as high as $924.60 during the session.

The gold contract for April delivery at the COMEX division of the NYMEX saw losses accelerate and settled down $15.60 or 1.7 percent at $911.10 an ounce.