Weaker rupee offsets global gold price drop: SLGJA

By Charithya Kumarasiri

The gold prices have declined in the international markets but the depreciation of the Sri Lankan rupee against the US dollar has limited the impact of the fall on the local gold prices, according to the Sri Lanka Gem and Jewellery Association (SLGJA).

Speaking to Mirror Business, SLGJA Jewellery Segment Head Sellakumar Kandasamy said the international gold prices have recently dropped to around US $ 4,000 per ounce, fluctuating between US $ 4,000 and US $ 4,100, with occasional dips below the US $ 4,000 level. The international gold price was around US $ 4,030 per ounce on June 15.

Kandasamy said the recent decline in the global gold prices was mainly driven by concerns over inflation in the United States, which has increased amid the tensions between the US and Iran. 

He added that expectations of the US Federal Reserve delaying interest rate cuts or even considering future rate increases, have placed pressure on the gold prices and increased market volatility.

However, Kandasamy said the decline in the global prices has not fully translated into lower prices in Sri Lanka, due to the weakening of the rupee against the US dollar. 

The rupee has depreciated from around Rs.320 to the Rs.340 range, partly offsetting the reduction in the international gold prices.

A 24-karat gold sovereign was trading at around Rs.375,000 to Rs.376,000, as of July 15, in the local market.

Sri Lanka’s gold market continues to operate largely through informal channels, due to the absence of gold imports, he said. Traders set the local prices based on the international market movements, while much of the gold available locally comes from the jewellery auctioned by the banks, after the pawn defaults and old jewellery sold by the customers.

As a result, trading activity in the domestic gold market remains relatively subdued, he added.