At 9 pm there is a long line of customers at Waman Hari Pethe Jeweller’s store at Bhandup in Mumbai waiting for their turn to get into the store and make a token purchase as Akshaya Tritiya, celebrated on Tuesday across the country, is considered to be an auspicious day to buy jewellery. Like this jewellery outlet in Bhandup, many others across major towns and cities in the country are witness to the same scene.
Akshaya Tritiya has taken off on a positive note with increasing footfalls in jewellery shops across the country, said jewellers. Post- demonetisation and GST, for the first time, the sentiment has turned out to be positive. The dip in the price of gold too lent support to customers to make gold purchases on Tuesday.
Gold prices were down by Rs 50 to Rs 32,670 per 10 gram at the bullion market in Delhi on Tuesday, according to the All India Sarafa Association. The fall in demand from local jewellers and retailers at the domestic spot market led to the dip in gold prices despite it being Akshaya Tritiya.
The most-sought gold items on this auspicious occasion were lightweight items like earrings, ear studs, finger rings and also gold coins in the range of 1 gram and 2 grams. This has been largely the trend. The wedding season has just begun and that has led to many customers buying heavy jewellery items priced above Rs 50,000 to Rs 3 lakhs in gold and diamond jewellery. Coupled with schemes as discounts in making charges, customers are buying gold, a change the jewellers are watching with cheer as it has been nearly three years since they have witnessed this kind of frenzied buying.
The jewellers Firstpost spoke with were in an upbeat mood. There has been a drop in prices at Rs 33,000 per 10 grams from February 2018 to Rs 31,500 now, said Ashish Pethe, partner, Waman Hari Pethe Jewellers, explaining the rush for jewellery purchases. Concurs Anantha Padmanaban, chairman, All India Gem and Jewellery Domestic Council, Akshaya Tritiya 2019 has been positive. “Since the timing between 3 pm and 4.30 pm is considered inauspicious, there have been few footfalls at noon. The weather is too hot and also because it is a weekday we expect more customers to throng the stores post-5 pm.” There has been 10-15 percent more footfalls this year for Akshaya Tritiya compared to last year, he said.
But some view the fact that there are people coming in to gold jewellery stores all day as a change in itself compared to the almost non-existent customers at the stores for a long time now in the country. “Footfalls are good despite the heat and a working day. Mostly women are visiting shops to buy token items like coins or lightweight jewellery. Many are coming in to pick up pre-booked jewellery,” said Nitin Khandelwal of Khandelwal Jewellers, to PTI. He expressed the hope that the momentum would gather more speed by evening.
Barring Q4 2018, the import of gold has been higher than the demand. This can be witnessed consistently from Q1 2017 till Q1 2019. Every quarter, bullion import has been higher than demand except for Q4 December 2018.
There is definitely a pent-up demand for gold, said Somasundaram PR, Managing Director, World Gold Council. There are stocks waiting to be sold and this is bound to show up in the demand this year, he said.
Demand for gold, jewellery
There was close to 170 tonnes as difference between imports and demand in the last nine quarters post-demonetisation, Somasundaram said. Gold sold really well during demonetisation and there has been surplus demand one or two more quarters due to destocking.
As sentiment was very high, there were discounts being offered for gold. However, with the equity market being over-valued as of now, customer sentiment is returning with regard to jewellery purchases as ornaments and as an investment, too, said Somasundaram. “One needs to be very discerning with regard to equities. The markets have been generally hovering around 38,000. The debt market is not doing well either. It is not going to be easy for a new investor to get into these markets very easily. Hence gold at around Rs 31,500, will come in handy for the investor. And so the precious metal is being preferred,” he said.
Gold purchases across the country increased by 30 percent during this Akshaya Tritiya as compared to last year, said Praveen Khandelwal, National General Secretary of Confederation of All India Traders (CAIT). Despite an alternative like Bond and Exchange-Traded Fund (ETF), customers’ attachment to physical gold has not diminished as gold prices are lower than last year. Apart from this, the market has completely recovered from the ban on accounting and GST, Khandelwal said.
The global scenario is also favouring the yellow metal. The softening of Fed rates, the Brexit threat continuing unabated, and the geopolitical issues like not much progress in the US-China trade talks have all been favourable for gold prices. If one were to look at the domestic scenario, there are indications that monsoons are likely to be good. Rural incomes are rising. All these positive factors strengthen the position gold, said an analyst.
Gold coins vs jewellery
The government launched ETFs a few years ago but it has not really caught on, said an analyst. ETFs did well between 2008-2012, when India imported around 2 billion tonnes of gold. Gold prices were range-bound and hovered between $1200-$1250. Investors felt it was pointless to have such gold holding and that impacted its demand. With the commissions on ETFs coming down, the prospects of ETFs has dimmed further and gold has become probably least distributed financial product. In the past few years, ETFs have lost their sheen and is less than a billion dollars now, the analyst said. In the interim, the government introduced sovereign gold bonds which are not as liquid as ETFs. With sovereign gold bonds giving more returns unlike ETFs, the former has cannibalised the latter, the analyst added.
Meanwhile, on Tuesday, gold coins of 5 grams and 10 grams flew off the shelves for most jewellers and also online purchases. Suvankar Sen, fourth-generation scion of Senco Gold and Diamonds with close to 100 stores in 25 cities said, people buying lightweight jewellery are higher than those buying heavy jewellery with average ticket size between Rs 10,000 and Rs 50,000. However, online sales are doing better than offline sales, Sen said, as people prefer buying gold coins and bars online. It is the young who are buying gold more this year, he said, with small ticket purchases. Still, Sen believes that the growth in gold purchases may be in single digits around 7-8 percent as there is uncertainty with elections, Cyclone Fani which has dampened sentiment in the country and also the uncertain global conditions that is affecting sentiment for the long haul.