Global uncertainties have mounted with US President Donald Trump being hospitalised with Covid-19 ahead of the US elections and gold prices are shooting up. However, jewellers in India said rising prices may be a short term deterrent but it will bring genuine buyers to the market in the upcoming festive season as a price rise will push them to buy gold because it is an appreciating asset that they are purchasing.
India is the second largest consumer of gold in the world with annual consumption of 800-850 tonnes. This year, gold has given more than 25% return to the consumers and investors.
Gold prices had fallen below Rs 50,000 per 10 gm level last month. But on Thursday, prices went up again in the spot market to touch Rs 50,413 per 10 gm level.
“After eight weeks, the gold price rally has regained momentum and this time the price rally is likely to be an extended one because of the heightened uncertainty in the global market. Investors are in risk-aversion mode after the US president tested positive for Covid-19. Moreover, ahead of the US election, gold has emerged as the potent hedge against economic volatility world over,” said Ahammed MP, chairman, Malabar Gold & Diamonds.
The safe-haven status of gold strengthened amid the pandemic will have a spill-over impact on jewellery sales as well. “The gold rally could have a short-term deterrent effect on the jewellery sales. Once customers get used to the new price-levels, gold jewellery sales will gain further momentum in the upcoming festive and wedding season,” he added.
Other jewellers too echoed Malabar chairman’s views. Vaibhav Saraf, director of Aisshpra Gems & Jewels that has presence in tier 2 cities, said there is a lot of pent-up spending power in the market. “With the onset of the festive season, demand is already up. A change in gold prices might slow down sales for a few days, but the season is looking bright to us,” he said.
Jewellers feel that consumers have come to terms with Rs 50,000 per 10 gm as the new base price for gold.
“Only genuine buyers will buy for Diwali and the upcoming wedding season. Prices going up will in fact push them to buy gold because it is an appreciating asset that they are purchasing. So, I don’t foresee a reduction in sale because of the prices going up. In fact it may work the other way round and increase sales in this period of Covid uncertainty,” said Ishu Datwani, founder, Anmol Jewellers.
However, Sriram Iyer, senior research analyst at Reliance Securities feels that markets did move briefly higher supported by slightly weak payrolls number on Friday, but investors continued to have more faith in the US currency. “With the uncertainty surrounding the Trump campaign and elections, safe haven appeal has moved to the US. Dollar, rather than the yellow metal,” he said.