Prices, inflation dent gold demand on Akshaya Tritiya

MUMBAI Wed Apr 25, 2012 2:36am IST

1 of 2. A woman is reflected in a mirror as she tries a gold earring inside a gold jewellery showroom in the Kochi April 16, 2012.

Credit: Reuters/Sivaram V

Related Topics

MUMBAI (Reuters) - Spending on gold at this year's Hindu and Jain holy festival of Akshaya Tritiya in India has been subdued compared with the usual splurge, as families struggle with rising expenses and high prices for the ultimate status symbol.

Gold consumption is likely to fall by as much as 50 percent to 10 tonnes at the festival on Tuesday, said Prithviraj Kothari, president of the Bombay Bullion Association.

"Sales are less than expected as prices are high and even inflation is high. So there are no savings," he said.

Akshaya Tritiya is the second-biggest gold-buying festival after Dhanteras in India, one of the world's top buyers of gold where the level of demand can have an effect on global prices.

Local prices of the yellow metal have risen, however, due partly to the rupee, which has depreciated 10 percent so far in 2012, and the doubling of the import duty to 4 percent.

India's gold imports are expected to fall to 655 tonnes this year from a record 969 tonnes last year, a Reuters poll found.

"Sales were good last year, but that is history," said Daman Prakash Rathod, director with Chennai-based wholesaler MNC Bullion.

"The ordinary person has to shell out a budget of 4,000 rupees per month or more. Incomes have not improved, while expenses have risen manifold," he added.

"The love for gold is not lost and never will be lost, but there is lack of enthusiasm," Rathod said.

For example, Manisha Gajani, a Mumbai-based homemaker, has been an avid buyer of gold at every Indian festival for the past 20 years.

"An investment in gold of 6,000 rupees a few years ago has given us 28,000," said Gajani, 42, explaining her gold-only investment rationale.

But this year she has bought only one 5 gram gold coin to celebrate Akshaya Tritiya, half of her purchase last year.

"We have to adjust according to our household expense budgets," she said.

For graphic on India/China gold demand, click: r.reuters.com/xem66s

ETFs

Meanwhile, sales volumes of gold exchange-traded funds (ETFs) in India have grown this year due partly to the ease of buying and selling over the Internet.

"People have now realised it is a very efficient way to buy gold," said Lakshmi Iyer, head of fixed income and products of Kotak Mutual Fund.

Trading in gold ETFs jumped on Tuesday, because people have started presenting the paper instruments as gifts rather than the metal itself.

Over 200,000 units of Kotak Gold ETF traded on Tuesday, compared with a typical daily average of 2,000 to 5,000 units, Iyer said.

The volume of spot gold traded electronically on the National Spot Exchange reached 30 kg on Tuesday, up from 13 kg on Monday.

Twelve Indian mutual fund managers are offering gold ETF products, which together amounted to 97.95 billion rupees in assets by end-February.

ETFs' holdings of the metal are still small by comparison with India's annual consumption of about 900 tonnes of gold, but brokers and fund managers see the potential for growth of this paper gold.

(Editing by Malini Menon and Jane Baird)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Everest Tragedy

Everest Tragedy

Search ends for missing on Everest, some Sherpas call for shutdown.  Full Article 

Ukraine Crisis

Ukraine Crisis

Deadly gun attack in eastern Ukraine shakes fragile Geneva accord.  Full Article 

Hamilton Wins

Hamilton Wins

Lewis Hamilton wins Chinese GP in Mercedes one-two.  Full Article 

Monte Carlo Masters

Monte Carlo Masters

Wawrinka beats Federer to win Monte Carlo Masters.  Full Article 

Happy Easter

Happy Easter

Pope presides at Vatican Mass leading Catholics into Easter.  Full Article 

Box Office

Box Office

'Captain America' soars again, tops 'Rio 2' to win U.S. box office.  Full Article 

Bollywood

Bollywood

Movie Review: 2 States.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage