Gold — shines in gloom

Even as gold rates spike during the pandemic, people are buying gold biscuits and coins as it seems to be the best investment option. Today the price is 50k plus for 10 gms, and is expected to touch 65k and more

As the pandemic upends economies worldwide, gold seems to be re-emerging as a safe haven for investors. It trades at a record high of `55,000 per 10 gm of 24k gold. Experts even claim that the metal will hit the `70,000-mark shortly and perhaps cross into the `80,000-zone by 2021. Though the spike in the metal’s prices has crushed the demand for gold jewellery, traders find reasons to cheer. Tomorrow, as the country celebrates Varalakshmi Vratam

— to worship Goddess Lakshmi, the goddess of wealth — traders expect heightened sales of gold, in coin and biscuits forms.

THE GOLDEN SIGNIFICANCE

People buy gold for a variety of reasons including sentiments, as an investment (gold continues to command a long-term value, which is a tag for being a safe haven for investment), as a hedge against inflation, for asset allocation, etc. However, Abhishek Chanda, the director of Kalasha Fine Jewels, also points out that gold carries a high perceived value and a high emotional quotient. “The main reason for buying gold is as an investment and as a safeguard for safety during uncertain times such as these. And why not, for gold is the best performing asset now. However, due to high prices, jewellers are hit because of slackened demand for jewellery and are forced to sell their gold jewellery at a discount,” reasons Abhishek, who expects the price for 10 gm of 24k gold to touch `65,000 by the year end. “So also, people have begun using up all their savings to buy gold bars with the hope that they can encash and profit around the price rise.”

UNDERSTANDING THE PRICE RISE

Ritesh Agarwal of Sri Shubham Jewellers, who also deals in bullion, believes that gold could touch `82,000 per 10 gm by 2021. “Following volatility in the market, hedging in gold on the

Multi Commodity Exchange of India Ltd. (MCX) has picked up steam,” points out Ritesh. “Traders are hedging their gold stock, which is resulting in the open interest rising on MCX. As its prices are shooting up, gold has started generating interest among investors, and is seen as a hedge against inflation.” For Abhishek Chanda from Kalasha, the answer in the rising prices of the metal is the deep economic crisis that the COVID-19 pandemic has left almost the entire world. “This system of investing in gold is not only in India, for many people in the western and European countries have begun pulling out all their money from shares and bonds and investing in gold,” he says. However, Sanjay Gulabani from Mangatram Jewellery sums it up accurately. “The gold price was already on an uptrend from last year. What added to the momentum is the fear of recession, weakening rupee and global investors’ interests shifting

from mutual funds, bonds, equity and real estate to gold, which is considered safer due to its liquidity quotient,” he says.

ALL THAT GLITTERS IS NOT GOLD

Hit hard by the pandemic, jewellery sales, much like many other luxury commodities, are expected to take several years to return to pre-pandemic levels, say experts. In fact, according to the World Gold Council, rocketing prices and a complete halt on retail activity meant that the jewellery sector was hit hardest. Pratiksha Prashant also points out to us how unlike essential items, jewellery sales during the pandemic have taken a hit, as have other luxury items. “The Indian economy has been affected in a way that no one has a mind-set to buy jewellery. Big weddings are postponed for the fear of spreading the virus, and smaller weddings are happening on a small scale, at people’s home, with smaller and intimate gathering. So, not many are even motivated to spend big as they are mostly adjusting with what they have and prepare for just the bare minimum.”

The main reason for buying gold is as an investment and as a safeguard for safety during uncertain times such as these. And why not, for gold is the best performing asset now. However, due to high prices, jewellers are hit because of slackened demand for jewellery

— Abhishek Chanda, the

director of KALASHA Fine Jewels