A golden miss

 

 

“Every year I used to buy at least one gold ornament during Dussehra. But this year I don’t think I will be able to buy any. My husband is working in a private sector company. Due to slowdown he has got no increment this year, which means our budget for the upcoming festivals will remain more or less same as last year. With price of everything rising thick and fast, I don’t think with the same budget I have any chance to buy any gold jewellery.” This is what visibly upset Jyotsna Patra, a home maker from Bhubaneswar, shared with us while discussing about her plans for this year’s festival season. But then, she is not the only one.

The great Indian festival season is certainly the time for sweets, clothes, jewellery and loads of fun. But the story this year seems to be a lot different. While the sky rocketing sugar prices have already threatened to take the sweetness away from those sweets; jewellery, especially gold, now seem to be slipping out of the hands of the aam aadmi, who generally enter inside those glitzy shops only during the festival season. After all the yellow metal is already hovering around an unprecedented price level of Rs.16,000 per 10 grams. And this is certainly not a price that the common man would like to pay when she goes to buy some gold during this year’s Dhanteras (a day considered auspicious for buying gold) as a lucky charm. Moreover, gold at Rs.16,000 and that too right before the festival season is just the tip of the iceberg. If you go by what Sajjan Jindal, Chairman, Associated Chambers of Commerce and Industry of India (ASSOCHAM) has to say, then buying gold this season will certainly be the biggest pain for many. As per him, “The bullion is likely to gradually see spurt in its prices and stay around Rs.18,000 per 10 grams by Diwali from current levels of around Rs.16,000 per 10 grams.”

Jindal’s words may come as a shocker to those who are not tracking the precious metal on a regular basis. For those who are in the business it’s just a little expansion of the way the bullion has behaved over the past few months on the back of heavy demand from different corners of the market to weather out the bad days. And hence, it has been an investor-led rally for the precious metal rather than a consumer-led demand, which normally used to be the case in India. Sighting the reason for the high gold price forecasted by ASSOCHAM Jindal adds up, “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.