Several attempts at the psychologically important level have finally succeeded, pushing prices to seven-month highs of $1,004.60/oz. Yet with the big gold purchasing centers of South and East Asia approaching seasonally strong demand periods on which the market is reliant, the higher prices couldn’t have come at a worse time.
“After very slow purchases in the first months of 2009, this year’s seasonal upturn may be more marked than usual as it coincides with improving consumer confidence, although the current sharp upward move in gold may see the jewelry trade wait on the sidelines for prices to stabilize at lower levels,” said analyst Darran Grabham at Standard Bank.
First due are Hindu festivals in September and October. The end of the monsoon season, meanwhile, brings the Indian wedding season, and then Chinese buyers enter as coins and trinkets are released for sale ahead of the New Year.
Jewelry accounts for about 70% of gold demand, according to the World Gold Council, and India is the world’s largest jewelry market by volume. When gold hit an all-time high 18 months ago, the knock-on effect on prices was swift as consumers voted with their feet.
Read more here: Gold Hits $1,000 an Ounce; Oil Prices Jump