By Prashant Mukherjee
New Delhi(IANS) : Skyrocketing gold prices at more than Rs.10,000 per 10 gm hasn’t stopped festival shoppers from buying it like never before, be it jewellery, coins or watches.
“Whoever wants to buy gold will buy anyhow. I would buy the same amount even if the prices were low,” said Ashish Kumar, a Noida-based businessman. “Of course, I only wear a gold ring. All the rest goes to my wife,” he added.
Gold prices are at a 28-year-high above Rs.10,000 per 10 gm, but merchants are still doing brisk business in the current festival season.
According to a recent report from the World Gold Council, India has witnessed a vibrant demand for gold this year and jewellery accounts for 70 percent of this demand.
Manufacturing and designing significantly add to the price of jewellery, making it less price-sensitive to the actual price movement of gold bullion.
Investing in gold is considered the best option by investors who avoid the stock markets. Although there should be one-to-one correlation between jewellery demand and the price of gold, in India jewellery is bought not only for adornment and investment but also for sentimental and traditional reasons – be it a marriage or other family functions.
The increase in gold prices may somewhat impact buying, but social traditions will continue to generate demand, even at higher price levels.
“Investing in gold mining companies as against buying gold bullion gives an investor the opportunity to benefit from the growth potential of equities as well as the strong fundamentals of gold. There is a multiplier effect on the profitability of gold mining companies with a rise in gold price,” said S. Naganath, president and chief investment officer of DSP Merrill Lynch Fund Managers.
Indians consider it auspicious to buy gold during Diwali when the goddess of wealth, Lakshmi, is worshipped. It is also bought during other festivals such as Durga Puja and Ganesh Chaturthi, celebrated ahead of Diwali.
The period from October to February also marks the marriage season when parents give their daughters gold jewellery, which has traditionally been a form of savings and is meant for wearing on special occasions.