Despite the surge in prices, gold is still the preferred choice of several households for reasons varying from safety to higher returns.
Dhanteras has finally arrived and the jewellery shops will be crowded with those buying gold and silver on the auspicious occasion, but this time buying these precious metals may pinch customers’ pockets. For the first time in the last five years, gold prices have surged over 20 per cent year-to-date (on-year). However, the demand for gold is evergreen in the Indian market. Gold is trading at Rs 39,620 per 10 gm today. Despite the surge in prices, gold is still the preferred choice of several households for reasons varying from safety to higher returns than other asset classes such as mutual fund, equity market, and fixed deposit. Meanwhile, surging prices and the availability of alternatives such as gold bond and gold ETF, have eaten away a small share of the physical gold market.
“Gold prices rose 21 per cent on-year and silver prices surged 17 per cent on-year till date. In the last five years, this is the highest surge in gold prices. But, Dhanteras is a festival where religious beliefs play an important role. Therefore, the quantity of buying may decrease but people will definitely buy,” Ajay Kedia, MD, Kedia Commodity, told Financial Express Online.
There are many other reasons which would affect the buying of gold this festive season. Five years back, investors had limited choice — investing in physical gold — but now there are options like gold bond, gold ETF, MCX future market, etc, which the investors may find more lucrative, Ajay Kedia added.
Being auspicious as well as an instrument of high returns, gold is the first priority of most of the investors. “The gold prices rose 6 per cent in the last five years; 8 per cent in the last three years; and over 20 per cent in the last year. Higher the price, the higher the sales of gold in India,” Manoj Jain, Director-Commodities and Forex banking, India Nivesh, told Financial Express Online.
Amid a spike in gold prices, the demand of gold in India can be understood by the fact that India has imported nearly 700 metric tonnes of Mexican gold to fulfill the domestic demand, Manoj Jain added.
The gold prices are not even settling at this level. The prices are expected to further rise in the next year. Global factors such as Brexit worries and slow growth in the global economy will push the gold prices to USD 1550-1580 by next Diwali, from the current level of USD 1470-1500, he further added.