Gold coins, bars, ETFs to outshine jewellery

This festive season low gold prices has generated more demand for investment instruments like coins, one kg gold bars and gold  exchange traded funds than gold jewellery, which has remained subdued despite prices being at 10-week low.

"This festive season, we expect good demand for coins, one-kg bars and ETFs, unlike past instances, when jewellery demand shot up during weak gold prices," said Suresh Hundia, former president of Bombay Bullion Association.

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"High prices have already hampered growth prospects in the sales. Gold sales in Mumbai market is likely to fall by around 200 kg this festive season against a normal sale of around 500kg. And the fall is mainly due to weak jewellery sales," added Hundia, who also heads one of the leading gold trading firm, Hundia Exports.

According to latest data shared by National Stock Exchange, year-on-year assets under management of gold ETFs has grown by 37 per cent from Rs 8,173 crore (Rs 81.73 billion) in September last year to Rs 11,198 crore (Rs 111.98 billion) as on September 2012.

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Giving details on the participation in gold ETF products, NSE informed that average number of accounts, where trading has taken place between August 2011 and August 2012, has gone up by 41 per cent from 56,000 to 79,000.

The average delivered value of gold ETFs, on NSE has gone up by 17 per cent to Rs 433 crore (Rs 4.33 billion), in the period September 2011 to August 2012, as compared with the previous 12 month period.

"Demand is expected to pick up from this month, because of the wedding season and festivals like Dhanteras and Diwali," said an NSE official.

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"We are expecting jewellery sales to go up by 35 per cent, while demand for gold coins is expected to go up by 45 per cent this year, as people feel investment in the precious metal is safe in the long run," said Rahul Singh, head-marketing, Shree Ganesh Jewellery House Ltd, adding that there have been advance booking orders for gold coins.

For the jewellers, a fall in gold prices just prior to festive season has come as a sign of encouragement for buyers. They are also hopeful that demand for jewellery to pick up later this season.

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"Investor demand in gold is robust but we expect jewellery demand to pick up as consumers have been waiting for prices to come down. Overall, the mood is upbeat, so we can see good Diwali sales this year," said Manoj Soni, director, AB Jewels - an Ahmedabad-based jeweller.

On the commodity exchanges, gold prices remained steady on Tuesday. Gold December contract on Multi Commodity Exchange was quoted at Rs 30,901 per 10 grams, a small vriation from Monday's level of Rs 30,664 per 10 grams.

MCX Gold had reached lowest since August this year to Rs 30,366 per 10 grams on Friday.