The recent equities rally has stolen the sheen from gold ahead of the festive season that starts from Ganesh Chaturthi. Jewellers and industry executives said gold sales are down by up to 15 per cent compared to last Ganesh Chaturthi despite prices falling below Rs 60,000 per 10 gm.
Though the price of gold is on the higher side at Rs 59,000 per 10 gm compared to Rs 50,880 per 10 gm this time last year, sales would have been good had there not been a rally in the stock market, said Surendra Mehta, national secretary, Indian Bullion & Jewellers Association (IBJA).
He said the mood in Zaveri Bazaar is not very upbeat as the footfalls are not rising as the usual phenomenon during the Ganesh Chaturthi period. “It sets the mood for the upcoming festive season that continues till Diwali,” Mehta said.
The launch of the sovereign gold bond on September 11, which will continue till September 15, too has impacted the physical sales of gold, feels analysts. Bhargava Vaidya, a senior gold trade analyst, said gold will never give crazy returns like the stocks but it gives steady returns.
“So, one should have 10-15% of gold in one’s portfolio. What we are seeing now is a temporary phenomenon,” Vaidya said.
Generally, when gold prices go up, the market sentiment that plays out is that it is the time to buy gold as prices will further soar giving handsome returns. For instance, from last September to this September, gold has given a return of 16 per cent. “But this year it is different. It is because of the rally in equity markets,” claimed Mehta.
“We do not see an immediate rally in gold prices. There are no major changes in the international scenario. Gold will remain choppy and prices may climb down from the current level,” said Hareesh V, head of commodities at Geojit Financial Services.
But M P Ahammed, chairman, Malabar Gold & Diamonds, feels the yellow metal is easily liquefiable. “However, equity is also emerging as an asset class for long-term wealth creation which augurs well for our economy. Therefore, risk appetite for equity and gold investors are different. There is no inherent rivalry between gold and equity as such. Equity markets touching new highs, in fact, create positive sentiment towards investment in general. Both gold and equity have significant roles in wealth creation,” he said.
Anuj Gupta, Head – Commodities and Currencies, HDFC Securities said “In general when the equity market increases people start investing in equity more to buy stocks in their portfolio. So nowadays the Nifty has tested 20000 levels so traders are looking towards equities.”
“We have also noticed that gold lost its momentum and corrected by more than 1.50% in the last two months, however Nifty increased by 3.84%. It seems that the interest of traders is increasing towards equity. Short term, gold may be sideways to bearish due to strength in equity, But in the long run traders should use the dips as a buying opportunity as gold always shines and always be a part of investments, festival season & marriage seasons demand. Our view In the short- to medium-term view is moderately bearish in bullion,”Gupta added.
