R Srinivasan, MD, Priyanka Bullion, in Madurai, has been in the bullion dealing business for a long time. The North Indian tradition of buying gold during Dhanteras, as part of Diwali, leads to good business during the festival season.
Wanting to buy gold on Dhanteras has increased in recent years, says Srinivasan. This year, too, bookings from his customers have already started. “The influence of North India has increased and people down South, too, think that buying gold on Dhanteras is auspicious. More than jewellery, women now want to buy it as bars of 20/30 gram…” His customers aside, Srinivasan himself too buys gold from the market during Diwali. “I buy for my children, the investment made that day brings luck…”
Srinivasan says his memorable Diwali was in the year 2007. He made a neat gain of over 45 per cent on the gold bought that year, in the next 12 months. However, this bullion dealer cautions customers against using the futures market to buy gold. “I tell all my customers who come asking for suggestions, to buy gold only in the physical market. In futures, the problem is, it becomes a pain if prices reverse. The additional margins requirements need to be met, else the stock broker will cut the position and the trader will make a loss. I strongly believe that the futures market is only for hedgers who have stock of gold and a view on prices.”
Srinivasan uses the futures market to hedge his positions in gold but feels that for marginal investors who want to make profit from gold price movements, the physical market is better.
But do gold prices increase every year during Dhanteras? “There is some increase in price from the last week of December to the first week of January because of drop in supply on holidays in the West and some increased demand in India…,” says Srinivasan. However, the numbers show that such a trend is not a given every year.