Gold jewellery sales expected to double this Akshaya Tritiya

Manisha Gupta
CNBC-TV18

Sales of gold jewellery are expected to double on the occasion of Akshaya Tritiya this year following a revival in the economy which was briefly shaken by demonetization last year. A strong wedding season and a rising rupee will be among the triggers that will drive buyers to shop for more gold on Akshaya Tritiya which falls on Friday.

Demand for gold on the day of the festival last year was estimated to be 20 tonnes. Gold traders will be sweetening the deal this year with freebies, discounts and cash-back offers. Some branded buyers are giving huge discounts on making charges, while others are gifting free coins with purchases.

Last year jewellers' long strike agitating against the one-percent excise levy had given them little time to come up with new and trendy designs, which keep them in the fight against competition.

Akshaya Tritiya is considered auspicious for Hindus and Jains who stock up on the yellow metal and organise weddings and other festivities around the day.

Shoppers will be spoilt for choice this year as they will be able to choose from a number of options to invest in the metal. Alongside gold bars or coins, there are Gold ETFs which will be available to trade and buy on the exchanges for longer hours than normal. Gold funds are yet another way to invest into the gold mines. 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 percent per annum, paid twice a year.

Gold prices in the last few days have come off their 5-month highs. The appreciating Indian rupee also has led to a softening of Indian gold prices. Gold prices though are expected to see support going forward from a weakness in US dollar, elevated global inflation levels, elections in Europe and other geopolitical concerns. The central banks have been net holders of gold, with Russia and European countries adding gold to their reserves. India’s gold reserves stand at around 557 tonnes which is on the higher side. Global markets have seen net inflows into the commodity this year with 80 percent of the kitty parked in long gold. Global markets have seen prices hit near USD 1300 an ounce last week, while the Indian prices saw highs at Rs 29,800 per 10 gms.

The upside on the gold prices though will depend on money shifting into other asset classes like equities, crude oil and the US Fed rate hike, too.
Gold is expected to trade in a large range taking all the above factors into account. A break of USD 1305 will open the doors for USD 1320-1340, The downside seems capped at USD 1250 for now.

Gold has been giving positive returns over the last couple of years. It has exhibited its safe haven attributes at times of global uncertainties like the Greece debt default, US easing monetary policy and during the more recent issues concerning Syria and North Korea. Gold also has proved its mettle during times of risk aversion and hedge against inflation. Depending on who you are talking to, you will be advised to put 5 percent to 25 percent of your portfolio in gold.