Is Bullion a safe bet?
There are multiple reasons for the increasing gold prices and the yellow metal looks to be in a bullish mode with rates further expected to increase over the next few years. One of the most favoured investment mediums has been gold bullion and we touched base with Surendra Mehta, National Secretary, Indian Bullion and Jewellers Association and discussed in detail about the commodity. Below are the excerpts from the interview.
How has bullion as a commodity, grown over the last couple of decades?
Bullion is the most popular commodity and various bullion products have been developed over the years for the bullion industry. However, no new product is developed in the jewellery market.
Following new products have come up in bullion industry in the last decade.
• Sovereign Gold Bond
• Digital Gold
• ETF gaining more popularity
• Trading on commodity exchange through future contract
• Trading on exchange through option contract
• Pure Gold accumulation plan
Bullion industry has shown a lot of maturity in the last decade and have been self-regulating themselves resulting in shift of jewellery business to bullion as customer now have more faith in bullion than jewellery. Bullion industry has got approval of India, good delivery from BIS and SEBI, which will go in a long way to regularize the industry. The setting up of International Bullion Exchange and Spot Exchange will see major foreign players coming to India for bullion trade. Days are not far where even 1 gm gold coin will be available on the exchange.
What have been the major factors driving the growth of the segment?
The major factor includes only one-point agenda and that is to regain faith of customer in Bullion. For this entire refiners and bullion industry have come together and have approached govt for regularization.
How has the pandemic affected the bullion market?
Gold in Bullion form has always been a safe haven for investment. ETF buying and central bank buying have been seen in various countries for gold due to lower bond yield and geopolitical tension during pandemic. However, physical demand never drives the bullion prices and hence soaring prices are not due to demand.
What are the steps you are undertaking to get back to normal business with markets now slowly opening?
Indian Bullion and Jewellers Association (IBJA) has prepared SOP for the industry to start operation post pandemic. However, due to lock down in various states even at this stage, it will take lot of time to revive the industry. This is a time for consolidation and not expansion. This is the time to stop giving goods on credit. This is the time for recalling goods where payments have not been received. This is the time to repay or reduce bank loans even at cost of reducing inventory. This is the time for reduction in operating expenses. This is time to stop all marketing cost. If industry is able to achieve all this during lock down, I am sure it will emerge as clear winner post pandemics.
With consumer preference now slowly shifting to E-Gold as an investment medium, what are the future growth avenues you anticipate for the segment?
Every product has a market share and we should allow all product to establish in the market. Customer is highly educated and have in depth knowledge of all product in the time of digital world. I strongly feel that there is enough scope of gold saving account and gold recurring deposit account in e-segment in the country. Let customers decide what they want to buy and how they want to buy. It is important that fair pricing, purity, quality, packing, after sale services, warranty and guarantee will prevail in future which I am sure only bullion segment is capable of giving.