Strong sales on ‘Akshaya Tritiya.’
By R. Chandrasekaran
CHENNAI: The price of gold in the international market witnessed a sharp fall of over 15 percent in the current year reversing the 12-year Bull Run as investors were slowly turning back to equity and bond markets as the U.S. Fed is likely to withdraw bullion-friendly bond buying program later this year.
This is despite gold rewarding investors’ an average 16 – 18 percent returns during this period. However, the lust for gold among the Indians continues to be robust. This could be seen from the way people thronged jewelry shops on Akshaya Tritiya, an auspicious day for buying the yellow metal, on May 13.
There are at least three occasions in a year where Indians consider buying gold will bring prosperity. Akshaya Tritiya, Dhanteras during the Diwali time and Raksha Bandhan are the three occasions and the first one to kick start every year is Akshaya Tritiya.
People tend to buy at least one gram of gold on Akshaya Tritiya and jewelry shops are not the only ones to come out with a special offer on this day. Even the banks, be it the public sector or private, had started marketing gold coins and bars aggressively during the last few years. Their publicity starts at least one month ahead and start collecting orders with a promise to deliver them on Akshaya Tritiya. The Indian post offices too joined the race and started selling gold to make their pound of flesh from the growing demand.
The fact that there is a consistent rise in percentage of sales on Akshaya Tritiya compared to the whole year is testimony to the sentiment attached to this auspicious day. For instance, report indicates that Kotak Mahindra Bank’s gold sales on Akshaya Tritiya represented 44 percent of its total gold sales in 2012 compared to 40 percent in 2010 and 36 percent in 2009.
In fact, banks had even kept a target for not only the branches but also for its executives. This has forced both private as well as public sector banks to import gold in April itself and this was one of the reasons why gold imports surged 138 percent to $7.5 billion, resulting in a wider trade deficit compared to the previous month.
When the price of the precious metal plummeted sharply in April, people started buying gold to take advantage of the price, thereby reversing the trend to post modest gains. However, experts and analysts have cautioned the buyers to avoid buying physical gold and instead opt for exchange traded funds or buy in futures or spot exchange in small lots. This was obviously meant to take advantage of every possible downside correction in the yellow metal prices.
Despite experts and local jewelry shop owners indicating that the precious metal will likely fall further, there was no respite in buying gold during the Akshaya Tritiya. This is quite evident from the retailers’ performance during the particular day. They have reportedly recorded between 15 percent and 40 percent surge in gold sales over the last year. Bombay Bullion Association president Mohit Kamboj has told Hindustan Times, “Retailers witnessed strong demand from retail customers. Compared to last Akhsahya Tritiya, we have seen an increase of around 15% in the sale of gold.”
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