A 3 percent drop in gold prices beginning March has spurred demand for the yellow metal in the physical and paper form. Wealth managers said that clients looking at gold as a long-term investment with regular interest earning are buying sovereign gold bonds (SGBs) from the secondary market at the current rate, which is below Rs 4,500 per 10gm and lower than the last tranche of SGBs that were sold at a price of Rs 4,662 per gm.
In the physical market, the price drop has boosted wedding jewellery purchases but the rising Covid cases remains a concern. Jewellers said that customers are quickly shift to online purchasing so they do not miss out the opportunity of buying gold at a lower price without visiting stores.
“I strongly urge discerning clients to acquire SGBs from the secondary market as these are reliable diversifiers and provide a modicum of stability to portfolios. In the backdrop of contemporary trends in the commodity markets, including the probability of advancing inflation, these bonds will act as a proxy for gold prices. Gold is a hedge against inflationary pressure,” said Nilanjan Dey, director, Wishlist Advisors, a wealth management firm.
Explained Sriram Iyer, senior research analyst at Reliance Securities, that if someone is not looking at the fundamentals then he can invest in the fresh tranches of SGBs. “However, if the investor is looking or researching, then the secondary market is a better option,” he said.
Gold prices in India are down by nearly 17% from the all-time highs hit in 2020. The vaccine rollouts and rally in US bond yields has led to some liquidation in the yellow metal with risk-on sentiments. However, the fall in gold prices has ushered in investors waiting to buy gold at lower levels.
“The demand for gold has gone up both in physical and paper form. There is continuous flow of jewellers at Zaveri Bazar who are coming to buy gold despite the rising cases of Covid,” said Surendra Mehta, national secretary of India Bullion & Jewellers Association (IBJA) from Zaveri Bazaar.
“The fall in gold prices, along with upcoming wedding season has given a much welcome boost to sales. However, with Covid cases starting to rise again, the public is anticipating another lockdown. Hence the urgency to buy gold has increased,” said Vaibhav Saraf, director, Aisshpra Gems and Jewels.
Ishu Datwani, founder of Mumbai-based Anmol Jewellers added “Because of the reduction in gold prices, our virtual calls, which had reduced, have gone up again.”
Analysts like Tapan Patel of HDFC Securities feel this is the right opportunity for investors to enter in gold investment as prices are in correction mode for the short term at least till March-end.
“The price range of Rs. 44,000-45,800 should be considered to accumulate gold systematically if not in lumpsum investment. The loose monetary policy from major central banks and high inflation fears are the key factors that can boost demand for yellow metal in long term with a price target of Rs 51,800-57,000 per 10 gram,” Patel added.