With Akshaya Tritiya round the corner, there is a renewed focus on gold. Whether its price goes up or down, Indians cannot take their eyes off it. Their fascination for the yellow metal continues to fuel its demand every year.
Jewellers have stocked up on gold to cash in on the cyclical event. Even though the Centre has come out with multiple investment options to dissuade people from investing in physical gold, the yellow metal has not lost its lustre with Indians. Last year, there was a slump in gold offtake around this time as traders then had been going through a pan-India protest opposing the Centre’s one per cent excise levy.
However, this time around the sale of gold is expected to go up many notches courtesy an uptick in economic sentiments, barring a hiatus following demonetisation and a favourable monsoon. Moreover, the price of gold has been range-bound on the lower side. A strong wedding season and a rising rupee will be among the other triggers that will drive buyers for more gold on Akshaya Tritiya which falls Saturday.
On their part, gold traders are sweetening the deal throwing in freebies, discounts and cash-back offers. Some jewellery houses give huge discounts on making charges while others are gifting free gold coins with every purchase.
Some premier traders have introduced mega prizes such as four-wheelers and flats. Akshaya Tritiya is considered auspicious by Hindus and Jains who stock up on the yellow metal and organise weddings and other festivities around the day. Shoppers this time round will be spoilt for choice as they have a wide array of options to choose from.
Alongside gold bars or coins, there are gold ETFs (exchange-traded funds) which will be available for trade and buy on the exchanges for longer hours than normal. Gold funds are yet another way to invest in gold. Jewellery company stocks will further widen their investment choices. Buyers can also buy into the Government of India Sovereign Gold Bond launched this week which will carry a fixed rate of interest of 2.5 per cent per annum, payble twice a year. However, shoppers will prefer buying physical gold to buying gold-based papers.
Gold prices have begun to soften over the last couple of weeks. An appreciating Indian rupee has also played its part in easing the gold prices. The price of the yellow metal (916 purity) has been ruling below Rs29,000 per gram over last few days.
Gold has been a traditional avenue for investments in India. It has been consistently giving good returns to investors over the last decade despite a mark-up in its price. Gold has remained a safe haven even in times of global uncertainties such as the Greece debt default, US easing monetary policy and more recent issues such as Syrian and North Korea crises. The yellow metal has also proved its mettle when it came to hedging against inflation. Going forward, the upside in gold prices will depend on factors such as the value of Indian rupee, money shifting into other asset classes such as equities, crude oil and the US Fed rate hike. Going by the current set of things, it is believed the yellow metal is still left with an upside and there does not seem to be any downside risk. Conditions are favourable and it is expected that the allure of gold will be more spectacular this time.
