Friday — the day of Dhanteras — may not see much action in shops or at the bourses.
Action is expected to be limited in gold ETFs. Volumes in gold ETFs have been declining following the RBI’s 80:20 rule on gold imports. The rule requires importers of the commodity to supply at least 20 per cent of their imports to exporters.
Also, recently as these units moved to a premium (over 4 per cent) to the NAV, investor interest has taken a hit. Gold BeES, for instance, closed at Rs 2,865 on Thursday, while the NAV was at Rs 2,782 on Wednesday.
Last year, turnover in Gold BeES was 15 times higher than the daily average in Dhanteras trading (on the NSE).
When we asked if similar action can be seen this year too, Kishore Narne-Associate Director, Head-Commodity and Currency at Motilal Oswal Commodity Broker, said, “Volumes could be higher than the daily average we are seeing now, but I don’t think last year’s performance will be repeated. Gold’s one-year returns have been pathetic, so people will not be enthused about it. Investors don’t buy a falling asset.”
Jewellers too see a limited buying activity.
Restrictions on loan
Consumers have tightened their purse strings and we have not received much advance orders, say jewellers. They say recovery in demand will be seen if prices correct to Rs 2,700/2,800 (for 22 karat gold).
Ba, Ramesh, CEO of south-based jewellery chain Thangamayil Jewellery, said, “People don’t have money with them. Last year they borrowed from finance companies by pledging old gold and used that money to buy new jewellery. But this year, as there is restriction on loan-to-value and some financiers require borrowers to pay back portions of the principal with interest in the loan period, people have stayed away from borrowing for spending.”
Waiting for correction
Even jewellers have been limiting their purchases, say bullion dealers. Jewellers are not in a hurry to stock up because on the one hand demand is weak while on the other, premium on gold bars has gone up. Vishal Vyas, Head-Operations at Pushpak Bullions, which supplies gold to over 70 jewellers in Mumbai and Ahmedabad, said, “Last year during Dhanteras we saw our customers placing orders for two-three kilograms at one go, but this year it’s just 500-600 grams; they are cautious.”
Ketan Shroff, Director of Penta Gold, a jewellery manufacturer/trader, said, “Demand is almost 35-40 per cent lower compared with last Diwali. Jewellers are buying but only in small quantities to replenish the sold stock.”
Following the Government’s 80:20 rule, gold imports have almost come to a standstill, which stoked the price of gold in the domestic market. However, with the buzz that the government may take some measures to free up imports, premium on gold bars is coming down – it has slid from $120/ounce last week to around $75-80/ounce now.