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A sales person shows a gold ring to customers at a jewellery showroom during Dhanteras, a Hindu festival associated with Lakshmi, the goddess of wealth, in Ahmedabad, India, October 28, 2016.Reuters file

Gold and silver prices dropped in India responding to weak global cues and tepid demand from traders in the Indian markets. The yellow metal closed Rs 200 lower at Rs 29,420 per 10 gm while silver prices fell Rs 825 to end at Rs 38,325 per kg in the Delhi bullion market, according to PTI.

Interestingly, the fall in gold prices comes amid a report released by the World Gold Council (WGC) a few days ago, which projected a temporary fall in demand in the near future before picking up ahead of the festival season.

"As consumers and importers brought forward their purchases to Q2 (June quarter), demand will likely be subdued for a few weeks. The stock is plentiful across the supply chain and consumers who have recently purchased are unlikely to do so again in the short term," the WGC said.

The demand in India for the yellow metal rose 41 percent to 126.7 tonnes from 89.8 tonnes in the corresponding period last year, even though China reported 5 percent drop, while the global demand increased 8 percent.

One of the primary factors was the stockpiling of gold by traders ahead of the GST rate fixation. "Expecting a punitive GST rate, jewellers and consumers alike crammed their purchases into the first two months of the quarter, slowing down once the government confirmed that a 3% rate would be applied," the WGC said. 

The same was evident in the June quarter performance of Titan, whose jewellery business under the brand name Tanishq posted substantial growth. The jewellery business revenues rose 54 percent to Rs 3,307 crore while the watches segment revenues remained flat at Rs 510 crore.

"Our jewellery business has done a stellar performance in the first quarter due to a combination of one of the best Akshaya Tritiya sales, a very successful gold exchange programme as well as an element of advancement of sales in June in anticipation of higher GST rates," Bhaskar Bhat, MD of Titan, said in a statement.