In total, almost one third of Indian investors who have not bought gold before are open to doing so in future.
A survey of Indian retail investors by the World Gold Council (WGC) has revealed that as much as 29% of them, who have never bought the precious metal in the past, are open to purchasing it in the future.
As much as 52% of investors already owned some form of gold, with 48% having invested in the one year preceding the survey, which was conducted between June and December 2019, before the Covid-19 outbreak in the country. But gold analysts say the precious metal’s attractiveness as an investment instrument has only enhanced after the pandemic spread its tentacles far and wide and caused a flight to safe-haven assets. About 76% of urban investors in India have said they invested in gold bars and coins in the past and 21% of the respondents, who have never bought the metal, wish to do so in the future. This suggests gold currently has a deeper penetration among urban investors. Nevertheless, 37% of rural investors would consider buying gold in the future despite never having done so before. And while these rural gold considerers offer a lower value opportunity than urban counterparts, they offer significant growth potential.
The survey came at a time when India’s gold demand dropped 9% year on year in 2019 to hit a three-year low of 690.4 tonne.
Demand crashed 18% y-o-y in the December quarter despite festive consumption, as record prices of the metal and an economic slowdown had put a leash on retail purchases. In fact, the September-December 2019 was the second worst quarter for Indian gold demand in a decade, while the July-December period marked the worst half-yearly performance since 2009. The survey’s findings are reflective of the immense potential for the yellow metal to emerge as an attractive investment option for the public, with appropriate policy intervention.
Somasundaram PR, MD, WGC India, said: “India’s retail investment landscape is evolving, underpinned by government-led financial inclusion programmes, the surge of fintech, and increasing investor knowledge. And, this clearly affects the gold industry. Businesses are constantly striving to leverage technology to make gold more accessible to retail investors.”
The survey points out that both rural and urban investors need further simplicity and reassurance from their investments. Also, the survey, titled ‘Retail gold insights 2019’, revealed that while 48% of respondents were deterred from buying gold due to a lack of trust, as much as 61% of Indian ‘considerers’ identified issues around trust as a barrier to buying the precious metal. “But there is, nonetheless, a sizable opportunity to increase penetration of gold investment among the Indian retail investor base. In total, almost one third of Indian investors who have not bought gold before are open to doing so in future. We call this group ‘gold considerers’ and they represent a significant pool of untapped demand,” the WGC said.
The survey also showed the gold industry has the potential to appeal to a sizable new audience. Technology can play a key role in opening up new avenues for gold investment; easy online accessibility is a must in this era of increasing global digitisation. Similarly, 65% of potential gold investors said they have gaps in their knowledge around gold.