Akshaya Tritiya: Are you buying coins, bars or gold ETFs?
Due to the galloping pace at which gold prices have risen, will demand for the yellow metal on the auspicious occasion of Akshaya Tritiya be hit?
April 24, 2012 / 14:32 IST
Anisha Mappat
Moneycontrol Bureau
Akshaya Tritiya has always been associated with auspicious buying whatever be the cost. Moneycontrol.com surveyed city jewellers, consumers and analysts to figure what will be the best investment option against the backdrop of soaring gold prices.Despite the yellow metal's meteoric rise in value, Indians have always been attracted to it as a safeguard against inflation and as an investment. India has changed tremendously in the past 20 years, but one thing that Indian society has clung on to is the habit of saving, especially using gold. A calendar dotted with festivals, wedding seasons and auspicious occasions further spurred this demand, pushing India to become the biggest consumers of the precious metal in the world.In the past few months, however, demand in India fell due to the high price of gold and the depreciation of the rupee. Gold hit a record high of Rs 29,516 per 10 gram in November last year, causing India's gold imports to tumble 44% in Q4 FY12. Despite this, Indian consumers are still flocking to retail jewellers for their yearly dose of Akshaya Tritiya gold. Considered to be the second most auspicious day to buy gold after Dhanteras, it is said that valuables purchased on this day will bring luck and success. Many strictly follow this tradition due to which gold prices have soared on or around this day.Jewellers buckle under rising costsWith gold above Rs 28,000 per 10gm, expectations were that jewellers were going to take a brutal beating this year. However, several buyers said that they were not withholding their purchases due to high prices but instead were buying in smaller quantities. “If I used to buy 10gm earlier, this year I will buy only 5gm,” said Vaishali Karulkar, who has been buying gold on auspicious occasions for the past several years.This is the sentiment across the country, and due to this mood retailers are offering attractive schemes to reel in customers. Tata's Tanishq informed Moneycontrol.com that they have already put in place several offers which will help sustain demand.Looking back though, history shows that demand for gold is not always related to the price of gold. The below chart shows the volume of gold purchased on Akshaya Tritiya in the years 2004-2011. The below chart indicates that volumes have steadily increased despite the price rise, only falling when gold breached the Rs 20,000 mark last year.
Apart from auspicious demand, however, the gems and jewellery industry has been hit hard by the bullish rally in commodities late last year. Leading player in South India Joy Alukkas told Moneycontrol.com that rising prices did adversely impact sales in the past year, but the wedding season and other festivals helped reduce the damage.The bigger cut was seen across midsize firms. A retailer in Mumbai told Moneycontrol.com that sales had dropped by 50% year on year due to falling demand. On the positive side, they noted that people, especially housewives, were educating themselves about the price of gold, demand and supply relations etc so as to get a better understanding of the market.Coins, bars or gold ETFs - The better investmentSince the nature of the purchase is investment, buyers prefer gold coins, bars or bricks on Akshaya Tritiya instead of jewellery. A total of 40% Joy Alukkas's sales on this day account for gold coins, and this trend is seen amongst other retailers as well.Also cashing in on the demand for coins instead of ornaments, banks have stocked up on gold coins in all denominations and have introduced financial discounts and schemes to encourage purchases.But with the popularity of gold exchange traded funds growing, will there be a time where even auspicious buying of gold is done via ETFs?Kaushal Jaini of Dani Commodities doesn't believe so. Though demand for gold ETFs has been on the rise, he says that people will still prefer buying physical gold for auspicious reasons.On the other hand, Astha Jain of Hem Securities believes there could be a shift towards ETFs a few years down the line. Since this form offers tax benefits as well as ease in buying, she tells Moneycontrol.com that there may be a shift in trend soon.The National Spot Exchange this year has waived conversion and transaction charges for E-Gold, E-Silver and E-Platinum transactions on April 24, further encouraging consumers to shift from physical buying.Overall, no matter what the price of gold is, India will continue to remain one of the largest consumers of the yellow metal for both investment and sentimental purposes.anisha.mappat@network18online.com Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
