Gold prices fall with appreciation of rupee

• Jewellery marketers welcome dip and say could help boost sales 

The gold price has come down significantly, as a result of the rupees appreciation against the dollar, the Sri Lanka Gem and Jewellery Association said.

As per the association, a 24-karat gold sovereign which was at Rs. 185,000 last week has reduced by Rs. 14,500, whilst a 22-karat sovereign which was at Rs. 172,000 last week has come down by Rs. 15,000 - Rs. 17,000 at present.

“The going rate for 24-karat sovereign is now at Rs. 170,500 and for 22-karat sovereign is at Rs. 157,500,” the Association noted. Jewellery traders in Sea Street Colombo told the Daily FT that they did not expect such a huge plunge in prices at once.

“We did not anticipate the prices to drop drastically to this level. At the moment the dollar rate is at $ 325 against the rupee and if the rupee appreciates further the gold prices will come down,” he added.

The price of gold is generally inversely related to the value of the dollar because the metal is dollar-denominated. 

However, another vendor said the price drop will help their businesses, which took a huge toll on the high exchange rate during the past year.

“It is still too early to say if prices will further drop, but if gold prices come to an affordable rate, our businesses will see an improvement in sales,” he said.

He pointed out that people who had necessities such as weddings, attainment of age ceremonies, and ear piercing ceremonies for new-borns bought gold jewellery.

“Earlier, people used to buy gold as an investment tool. But with the economic crisis, we saw that habit coming to a standstill. Only a handful of customers purchased articles,” he explained.