Yellow metal always attracts customers — for its ornamental value and as an investment option

At 10 in the morning, the row of jewellery shops on South Avani Moola Street is already seeing the first customers. During the next one hour, more people drift in and out of the shops and the number of customers slowly begins to rise. This scene is witnessed despite the fact that gold prices have been constantly fluctuating since the slump in May.

“More than 50 per cent of our customers believe gold is a better investment option than mutual funds and equity shares,” says a bank manager in the city.

Most jewellers agree that there is always a constant demand for gold because of the wedding market. V.Jayalakshmi, a customer, justifies: “My daughter’s wedding is coming up in three months and even though the rates are high, we think it’s better to get done with our jewellery shopping now itself rather than waiting for the rates to come down; what if the rates go higher instead?”

Sivasankaran S, Managing Director of Shri Krishna Thanganagai Maaligai, says gold sales were exceptionally high when the price fell last month. “Most shops will also face a relative slump in sales in early June in view of school and college admissions,” he adds.

“Gold has a lot of sentimental value and people do not mind paying high prices. We don’t see a very big difference in our sales figures due to market fluctuations” says Ramesh M, a salesperson at Shri Jayaprabha Jewellers.

Salespersons at the shop explain how customers prefer plain ornaments to the ones that come embellished with stone as those with fewer stones have a higher resale value. “There is, however, a relative dip in sales during the end of May and early June since schools and colleges reopen begin and admission fees and all gobble up people’s money and time’’ says a salesman.

Owing to the high value of pure gold, gold coins in different sizes and weights are sold at all jewellery shops. “Gone are the days when people accumulated coins and gave them to us to make jewellery out of them,” says Mr.Ramesh. “Now, customers can simply bring in the coins they have and take jewellery for the same weight in exchange. They just have to pay the additional making and wastage charges,” he adds.

Gold coins are also preferred as an investment option owing to the fact that people don’t have to pay making or wastage charges that they shell out for jewellery.

Post offices sell gold coins at seven per cent discount round the year. They come in various sizes and are pure 24 carat, with certification from Valacambi, Switzerland, which minimises the risk of duplication. “The sale of gold coins here is in no way affected by the fluctuations in the market rate,” says a senior official at the Bibikulam post office. “We sell an average of about 15 grams of gold a week and more people buy on auspicious days such as Akshaya Trithiya and Pushya Nakshatra,” he adds.

In the last few years, coins of smaller sizes were in demand. “The half gram gold coins are the fastest selling and we sold a lot of them during Akshaya Trithiya this year. These are often bought to be given as gifts,” he says.

“But compared to the previous years, banks haven’t sold many gold coins this year,” says another bank manager. “People prefer buying coins from jewellery shops since they do not come with the additional cost of sales tax,” she says.

Buying gold coins from a bank has its own advantages. “Customers can take loans against the coins they bought from any reputed bank,” he says.

“These coins carry the seal and stamp of the bank where they were bought and are certified of 24 carat quality,” she adds.

A recent announcement by Union Finance Minister P Chidambaram about a plan to stop sale of gold at banks has not yet come into effect as banks say there has not been any official intimation.

Trends are slowly changing as the people are now turning towards Gold Exchange Traded Funds (ETF) from investing in gold and claiming its physical ownership.

“The ETF certificates start from 1 gram in value and can be liquidated for cash at any given time. More than 75 per cent of our customers, who used to buy gold, are now investing in the ETF,” a bank official says.

Despite the fluctuating market rates, gold still retains its place above silver in terms of demand and as an investment option. “The rate of return that one can expect on resale of gold after a year is much higher than that of silver,” says Mr.Ramesh.

With the growing belief that the price of gold will only keep increasing, the yellow metal continues to attract buyers and investors alike.

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