“This is due to the fact that more and more investors are flocking to take refuge in gold as an asset class as it happens to be the best bet against rising inflation. The high valuations of stocks and its attendant risk have
been by and large motivating investors to partly shift to gold as an investment class.” And why not? After all this is one such asset class, which has shown immense resistance to loss over the past two years, when there was carnage in the share markets the world over. For that matter even in India, while the BSE Sensex has offered only 19.82% return over the last 12 months, gold has returned nearly double (35.76%). The gold exchange traded funds too have returned a handsome of around 35%. And thus gold is the one, which is still glittering in the eyes of the investors despite the fact that the stock market is on an upswing at the moment. But it’s all for the investors and not for the traditional Indian buyers.
Historically, India has been the biggest consumer of gold. As per World Gold Council, privately held gold in Indian households alone amounts to 15,000 tonnes. And the festival season is that part of the year when demand for gold shoots up riding a wave of high demand from households only. But with the price level expected to range between Rs.16,000 to Rs.18,000 per 10 grams, analysts expect retail demand for the precious metal to take hit this season. As per Prithviraj Kothari, Director, Riddhi Siddhi Bullions, “Overall demand for gold will be less by 30% during the forthcoming festival season.”
It’s not just that the analysts are anticipating a fall in demand; the impact has already started to show its colour. Deeptirani of Syndicate Jewellers in Bhubaneswar avers, “Gold price has ushered a wide adverse impact on our business. Though puja season has started, customer inflow to our showrooms in Bhubaneswar and Berhampur is a lot lesser than what we had witnessed last year. We have announced 50% off on making charges on gold ornaments, but footfall in our shops is still on the lower side. Even those who are turning up are buying very little quantity due to high price of the metal and budget constraints.”
The way things are moving at the moment it’s quite clear that this year’s festival season will not be as joyful for many as it had been in the past. With global cues still standing strong and the festive demand coming in its way, gold price continues to hold on to its positive outlook. And this clearly means that for the Indian households who buy gold just for their love for the bullion, this is going to be a festival season worth not remembering.
been by and large motivating investors to partly shift to gold as an investment class.” And why not? After all this is one such asset class, which has shown immense resistance to loss over the past two years, when there was carnage in the share markets the world over. For that matter even in India, while the BSE Sensex has offered only 19.82% return over the last 12 months, gold has returned nearly double (35.76%). The gold exchange traded funds too have returned a handsome of around 35%. And thus gold is the one, which is still glittering in the eyes of the investors despite the fact that the stock market is on an upswing at the moment. But it’s all for the investors and not for the traditional Indian buyers.Historically, India has been the biggest consumer of gold. As per World Gold Council, privately held gold in Indian households alone amounts to 15,000 tonnes. And the festival season is that part of the year when demand for gold shoots up riding a wave of high demand from households only. But with the price level expected to range between Rs.16,000 to Rs.18,000 per 10 grams, analysts expect retail demand for the precious metal to take hit this season. As per Prithviraj Kothari, Director, Riddhi Siddhi Bullions, “Overall demand for gold will be less by 30% during the forthcoming festival season.”
It’s not just that the analysts are anticipating a fall in demand; the impact has already started to show its colour. Deeptirani of Syndicate Jewellers in Bhubaneswar avers, “Gold price has ushered a wide adverse impact on our business. Though puja season has started, customer inflow to our showrooms in Bhubaneswar and Berhampur is a lot lesser than what we had witnessed last year. We have announced 50% off on making charges on gold ornaments, but footfall in our shops is still on the lower side. Even those who are turning up are buying very little quantity due to high price of the metal and budget constraints.”
The way things are moving at the moment it’s quite clear that this year’s festival season will not be as joyful for many as it had been in the past. With global cues still standing strong and the festive demand coming in its way, gold price continues to hold on to its positive outlook. And this clearly means that for the Indian households who buy gold just for their love for the bullion, this is going to be a festival season worth not remembering.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2009
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative
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