Indians hold on to gold expecting a price rise

Kolkata: Indians have not parted with their household gold in the first quarter of the calendar year despite gold appreciating by 4.41 per cent. Old gold sales in the first quarter have dropped by 35-40 per cent compared to the previous quarter.

Analysts and traders feel that people are holding back yellow metal in anticipation that prices may climb further in the coming months if the tariff war between US and China intensifies.

“Also, if geo-political tensions between US and North Korea escalate, it too will have an impact on gold. In the first quarter of 2018, old gold sales have come down by 35-40 per cent,” said James Jose, secretary, Association of Gold Refineries and Mints. It is said that nearly 22,000 tonnes of gold are lying idle in Indian households.

Gold price on January 1 of this year was Rs 29,525 per 10 gm which went up to touch Rs 30,830 per 10 gm last week.

“Uncertainty has gone up following the trade war between the US and China, resulting in gold prices climbing,” said Sekhar Bhandari, business head for global transaction (banking and precious metals) at Kotak Mahindra Bank. “The yellow metal can become a safe haven again.”

Prices are expected to remain firm in the April-June quarter, and may even touch $ 1,380-$ 1,400 a troy ounce, Bhandari said.

Surendra Mehta, national secretary of India Bullion & Jewellers Association (IBJA), is optimistic that gold prices may touch Rs 33,000 per 10 gm in the coming months.

2017 was not an eventful year for gold.

Although prices went up by 11 per cent for a day or two, the returns for the entire year was around 6 per cent -7 per cent. In contrast, equities gave much higher returns to investors which took away the sheen from gold. In fact, in the last quarter of calendar 2017, return from gold prices was around 1 per cent. “There was selling pressure on gold in the last quarter as investors were getting out of the yellow metal and parking funds in equities. The scenario changed over the last few weeks after US-China tariff war kicked off,” said a bullion dealer.

Jose added that activity in gold might return around Akshaya Tritiya which falls on April 18 this year. Indians purchase gold on Akshaya Tritiya as they consider that purchasing the precious metal on this auspicious day can bring prosperity. “Around Akshaya Tritiya, we expect people to exchange old gold and buy something new. In fact, jewellery sales have also plummeted in the first quarter along with old gold sales,” said Saurabh Gadgil of Pune-based PNG Jewellers.