Date:19/06/2006 URL: http://www.thehindubusinessline.com/2006/06/19/stories/2006061902251400.htm

Back Gold buying set to pick up

Archana Venkat

Retailers look to large volumes in festive season as prices are off recent highs

IT'S TIME to try a new jewellery item. - Raju. V .

Chennai , June 18

The yellow metal never fails to attract - even as gold prices fluctuate.

The last few months have seen prices fall by over $100 an ounce (about Rs 160 a gram).

Despite this, no drastic surge is anticipated in gold buying by jewellers and retailers.

South India remains a market that invests in gold for emotional value - at any price.

For the retail consumer, things couldn't have got better. "People should look at buying gold - both jewellery and coins - at such dip phases," said Mr K. Shivram, Vice-President, World Gold Council, India.

In addition to sentimental buying, gold is also proving to be an attractive investment option in light of the recent stock market crash, he added.

Banks retailing gold agree on this point.

"We have seen increased buying activity only when the dips have passed and prices begin rising," said Mr N. Balasubramanian, Senior Manager (Precious Metals), IOB. This is because in a fall one doesn't realise the lowest value that a commodity can attain. Subsequently, a rise is price implies that an upward trend has started, thus alerting one to buy as much as one can.

Corporation Bank plans to introduce coins in 2 g and 4 g denominations due to the increased demand. Gold retailers and jewellers are confident of buoyant sales.

The fall in gold prices has retailers looking forward to large volume purchases in gold in the coming festival months.

"Jewellery sales have largely been independent of market price and we expect robust sales this year too," said Mr Balaji Vishwanathan, Head of Marketing, Kirtilals.

About 20 per cent rise in buying can be expected, said Mr Abhay Mehta, Director, Mehta Jewellery.

Price dip has not hit them hard

In the wake of the recent fall in gold prices, no one seems to have lost money. Banks retail gold at spot prices with an additional charge attributed to the quality of gold - 24 karat, 99.99 per cent pure, hall marked, tamper proof covering and Swiss assay certified. Sales tax is also added. This ensures they sell gold at a higher price than the market rate for 22 karat gold. ICICI Bank buys gold at international inter-bank rates.

"We do not hoard or speculate in gold. We buy in consignments depending on the demand at our offices," says Mr N. Balasubramanian, Senior Manager, Indian Overseas Bank. But what does a jeweller who has bought gold at high prices do? "We do not hoard gold, but buy as per our requirement. Yes, losses do occur when prices fall, but it is part of this business," says Mr Abhay Mehta, Director, Mehta Jewellery.

Many large jewellers do hoard a certain proportion of gold but not when prices are high. "They hoard gold when the market price is low (in a dip phase) and make money on it when prices go up," says Mr K. Shivram, Vice President, World Gold Council India.