LONDON (Commodity Online): With bullion analysts predicting a rise in gold prices following the European crisis and the Chinese crackdown on realty, scrap gold sales are set to shoot up.
Scarp gold sales are normally up at a time when the gold prices go up as several people rush in to book profits. In April, India witnessed a surge in sales of old gold jewellery after remaining more or less tepid since the beginning of the new year.
A consumer who wishes to sell old jewellery to a scrap trader is a contributor to recycled gold supply. Similarly, a consumer opting for an exchange of, say, an old gold necklace for a new one indirectly contributes to recycled supply, as the jeweller with whom the swap takes place, sends the old necklace for processing to gold refineries.
In India, scrap supplies in the first quarter of the current calendar year are expected to be just half of the record 64 tonne recycled during the same time last year, as consumers wait at the sidelines for the price to touch Rs 18,000 over the next few months.
This is in keeping with analyst predictions of the metal testing an all-time high of $1,250 an ounce (31.10 gms) on the back of its safe-haven status and perception as a hedge against inflation.
Meanwhile, with the dollar hardening gold prices may test the $1,300 per ounce mark.
Following Standard and Poor's assigning junk status to Greek debt and downgrading Portugal sovereign credit rating, the market for currencies and precious metals has moved up. In the present uncertain times, investors will be involved in reassessing their portfolios and many will instinctively be turning to gold.
Amid concerns for sovereign debts and currencies like the euro and the pound, the risk averse investors will seek refuge in something which could stand ground in a difficult economic environment.
Gold, often described as the ultimate refuge for investors under pressure, has climbed to its highest since December and experts will not rule out the metal hardening further as long as the Europe remains a cause of concern. December saw the all-time high gold price of $1,266 a troy ounce.
The strong preference for gold over currencies, government bonds and commodities saw investor demand for the precious metal overtaking its use by the jewellery sector in 2009, for the first time in nearly 30 years.