NEW DELHI: Spot domestic gold prices in India have fallen by about 5 percent since the demonetisation move. However, the demand for oil is only likely to go up, as people look to use up old currency notes by filling up fuel.
Analysts say that the situation would drive a sharp rise in gasoline and gasoil sales in November, even though actual consumption may not have gone up.
“I expect gasoline to show a demand growth of 18%-20% year on year in November,” said Tushar Bansal, director at Ivy Global Energy, an independent oil and gas research consultancy. Diesel, on the other hand, is expected to show a demand increase of 8%-10% in November, he added.
Gold price was `30,024 per 10 gms on November 8, the day the move was announced, and it has fallen to `28,598 in the retail market over the fortnight.
The cash crisis could not have come at a worse time for the gold market, according to an analysis by S&P Global Platts. India consumes 800mt of gold annually, with the bulk of it imported. “I will not be surprised if India’s overall gold imports in 2016 is only about 70% of 2015 levels,” Platts stated in its report quoting Ashok Minawala, director at All India Gems and Jewellery Trade Federation.
The mining industry too has slowed down owing to the cash shortage, with firms unable to pay workers and mine owners having had to defer mining activity.
Meanwhile, agricultural markets have also suffered a temporary blow, even though the market is slowly picking up. Physical trading of goods in India’s agricultural markets has slowed down as market arrivals have significantly stopped, the analysis stated.