With the price of gold dipping, investments in various gold-related products have seen a rise.
The price of gold (.995 purity) in the futures market came down from a record high of around Rs. 2,900 a gram to hover around Rs. 2,400 now. While jewellers report an increase in business, other forms of gold trading, including gold coins, gold savings schemes by the mutual fund companies, are also seeing an increased interest.
Gold coins
The State Bank of India (SBI) that sells gold coins in various denominations for its retail customers has witnessed a spurt in buying over the last week. “We have seen an 8 to 10 per cent increase in retail sales,” SBI Chief Manager (Gold Banking Division) H.S. Gopinath told The Hindu . The demand for gold coins —available in denominations from 2 gram to 50 gram — had been sluggish when gold price was very high.
He estimated that the total sales of gold coins across the State by various financial institutions to be around 1,000 kg in the first six months of this fiscal while it was around 1,300 kg last fiscal. “Though we sold more last year, the money realisation was less. However, it was more this year despite lower quantity thanks to increase in gold prices,” Mr. Gopinath said.
Gold savings scheme
Even the sales of units in gold savings schemes launched by the mutual fund companies recently have seen a rise, which has been attributed to the efforts of investors to get an average price on their investments.
“Investments in gold savings schemes has seen about 5 per cent increase in volumes during the last 10 days. This is because some of our long-term investors wanted to get a good price for their investments as they had also bought units when gold price was at its peak,” said K.V. Murlidhara, an independent financial planner.
He said the advantages of the scheme was that investments start from Rs. 100 and it does not require demat accounts. It has emerged as a popular form of investments for small investors and those not wishing to buy physical gold. Even investments have come into exchange-traded funds (ETF), he added.
Commodity trading
Meanwhile, commodity trading in gold has not seen a considerable increase in volumes for long-term contracts, though intra-day trading volumes have increased. “Intra-day volumes are higher because of volatility in the market and there are many opportunities for the investors to get good returns,” said a senior executive of a leading Kerala-based commodity trading company, who didn't want to be named.
On the spurt in gold buying in other forms, he said: “It is a general psychology to buy gold when it falls and most of these buyers are retail investors and not speculators who follow commodity market.”
