The Future of Gold
Gold has been predominantly considered as one of the safest means of investments giving better returns compared to any other assets. Historically, Indians have had a penchant for collecting gold materials and jewellery and the amount of gold an individual/family possessed, showed of their class and superiority in the society. In recent times though, the yellow metal has broken new barriers in terms of touching INR 50,000 per 10 gms rate but what does the future hold for Gold? We got in touch with few of the industry thought leaders to get their views on the metal and what does the future hold for the same.
Snehal Chouksey, Director, Shobha Shringar Jewellers points out that the ongoing pandemic has affected everyone in the world and the gold prices in the domestic market are defined by the international prices. “Gold is the first commodity to get affected when any kind of natural or manmade calamity occurs. Hence, due to the pandemic, gold prices have seen an upward move. Also, Gold is the only asset class which gives confidence to investors around the world since forever. Apart from this, the Reserve Banks of the world are also acquiring more gold. The weakening of Indian rupee to dollar has also paved way to the rise Gold’s value in INR.” He adds
Vastupal Ranka, Director, Rare Jewels – A Ranka Legacy seconds with Snehal and further adds, “The pandemic resulted in a low supply of gold. The mining production has decreased with the lockdown being imposed. Also, central banks are cutting interest rates to support the growth of the economy. This has led to an increase in the gold prices.” He is of the opinion that Gold is expected to reach a tentative amount of over Rs 80,000 per 10 grams by the end of 2021. With equity shares falling down in this uncertain time, gold investment has increased considering it as a risk-free asset.
Aditi Amin, Jewelry Architect & Founder of Uncut By Aditi Amin is of the opinion that, “It's hard to make any specific predictions on gold rates, however until we find another commodity that is more stable than gold, it's highly unlikely that there will be any consolidation in gold prices. With the rising gold prices, discretionary buying has considerably gone down, however, buying gold to hedge socio-economic risks has gone up thus the rise in gold rates.” She has noticed that post the lockdown there has been a surge in sales; however, clients are looking to buy but not very expensive pieces of jewellery. Thus, keeping that fact in mind, they are promoting their Luxury Prét Collections which is well placed under 1lakh.
But with rising prices, the biggest question hovering jewellers mind is the effect on the upcoming wedding and festive season and Snehal believes that in terms of wedding, its sizes will shrink but jewellery buying will become more important as it’s the best way to retain the asset in the family instead of spending it on larger guest lists or multiple functions. He shares, “Wedding shopping has already started and will go on up to Diwali. This quarter will be crucial for the sector to recover the years cost and we already have started catering to the wedding requirements of upcoming weddings. Once this patch of weddings ends by December, the wedding requirements will slow down. When it comes to bridal requirements, we haven’t seen any downsizing as jewellery budget is usually predefined and is the last place a family compromise on. We are seeing preference shifting towards temple jewellery as it is gold jewellery in its purest form and the yellow metal has managed to prove its mettle in last two years with the appreciation it has given.”
Vastupal Ranka too shares the same thought and adds, “In India weddings and festivals, gold is considered as an important status symbol. The brides of the current generation would prefer to invest more in buying gold jewellery without showcasing them to their known ones as gold can be easily liquidated in the form of cash whenever required.”
Aditi Amin feels Gold Jewellery will always be in vogue, and Gold investments will almost always appreciate in value. With markets slowly opening up, she is seeing a rise in demand for fine jewellery. Aditi says that we have to embrace this as the new normal and find ways to survive and sustain. It no longer pays to be a local player. You have to increase your reach. “People are looking to buy, but not very expensive pieces and their movements have been restricted. Keeping these two facts in mind, making jewellery affordable and accessible is our primary agenda post-COVID”, she further adds.
When quizzed on how the increasing rates has affected the demand for gold jewellery, Vastupal responded by saying, “Gold prices have increased in this pandemic with the opening trade in the month of May, 2020 with the rates striking to 48,253 per 10 grams. In spite of the absence of physical demand of gold, gold security investment like the Gold Exchange Traded Fund (ETF) and sovereign gold bonds are experiencing demand in this current scenario. The demand of physical gold jewellery may rise in the month of October when weddings and festivals commence. According to data in April and May, gold paper instruments like Gold ETFs experienced 1,546 crore of inflows which is equivalent to 3.8 tonnes of gold. The demand for physical gold is expected to be hardly 30 tonne which is met by the old gold lying with the jewellers and refineries and also with the jewellery sold by the customers. With the jewellery shops remaining closed during lockdown, people went to the gold loan companies to meet their immediate need of cash.”
Vastupal also shares that, “At the beginning of unlock 1.0 we opened our store where only 30-40 persons were allowed to be inside the premises. Few customers would sell and buy gold at our stores. Hence, the ratio has been maintained with not much liquidity crunch. With the gold prices going up customers are likely to buy gold as an investment rather than selling it in the anticipation that the price would rise further within a year. This is because people have a mindset that gold is the safest form of investment with having a trust in this commodity. Our employees are maintaining proper sanitization and serving the customers in the right way by helping them with the right price and their enquiries thus building a long-term trust with them.”
Snehal on the other hand shares that, “The consumers are quite sceptical with regards to store visits as they feel it isn’t safe to step out amidst this pandemic situation. We as a brand have always been a bespoke jewellery house which simply means we tailor our products for our customers. Now in the new normal we are also tailoring the sales channels as per their comfort. By integrating digital mediums to provide services such to consumers such as Shop at Home service by giving them virtual tour of the jewellery on video call or provide them with WhatsApp consultation.”