Gold prices hit Rs 40,000 for first time

Gold prices breached the Rs 40,000 mark for 10 grams on Monday and reached a three-year high, and silver followed suit as well. This came amidst a trade war, increase in demand and a continuous slide in the rupee's value.

While gold prices increased, the rupee slipped to its lowest value this year, at over Rs 72 for a dollar. Gold prices increased across the world and reached a six-year high, amid the ongoing trade war between USA and China.

Typically, the demand for gold reflects the expectationsabout the future; the price of the precious metal tends to rise amid uncertaineconomic situations or political upheaval.

According to Bamalwa, if the current global political crisesand the trade wars continue to escalate, then the gold prices may shoot upfurther, crossing Rs 41,000 per 10 gm in the next few months. Despite thezooming prices, demand for gold may be marginally affected, around 10% or so,as the wedding and festive season begins next month.

Gold is still very much considered to be one of the primaryinvestment options of Indians, and is also considered a safe investment optionwhich is highly liquid. Higher prices of gold would mean that that it may beout of reach for consumers, and hence traders believe that along with a slumpin sales, customers will choose to recycle their gold in the upcoming season.

All Indian Gems & Jewellery Federation Chairman Bachhraj Bamalwa said that instead of fresh purchases, people may opt for recycling of old gold, at least up to 25%, in view of the higher prices.

Mumbai Jewelers' Federation President Rakesh Shetty "Peoplesimply prefer to bring in their old gold and pay the making charges for theirneeds as the current rates are too high. If the current global crises continue,then we expect it to cross Rs 41,000 for 10 gram by Diwali, which is not a healthysign for the industry,"According Bengaluru Jewellers' Association,their sales had come down to 20-25%.