For those who usher in the festive season by flaunting a new gold choker or a pair of danglers to die for, the news could not have come at a better time — in the past week, gold rates have actually headed south, hovering around Rs. 2,400 per gram for the last couple of days.
For some like Lakshmi Devi, the happiness quotient is in fact doubled. “I would have had to buy gold anyway as my son is getting married at the end of this month. I can't tell you how much this sudden drop in price means to me,” she said, visibly elated.
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The decline, according to industry insiders, is not unexpected. Trade pundits say that after the steep rise, the drop is a healthy correction and along expected lines. However, it has come earlier, they say. “Usually, gold prices dip after Deepavali as the demand drops. But the selloff on the global level, which has led to a decrease in rates by nearly 10 per cent, is a golden opportunity for investors and customers,” said S. Venkatesh Babu, Secretary, Bangalore Jewellers' Association.
Happenings in faraway markets have also contributed to the happy dip. Investors, fearing a liquidity crisis triggered by the debt crisis across Europe, are reported to be in cash-is-king mode. The liquidation of their gold stocks resulted in prices falling by 11 per cent in September, and one-fifth lower than levels prevailing a year ago.
Yo-yoing gold prices have also caught traders by surprise. Trade sources warn that smaller players who had bought the yellow metal when prices were on their way up, speculating prices would continue to rise, are attempting to “alloy” gold with metals such as iridium, ruthenium, cobalt, palladium and even tin.
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Queuing up
Ashik Xavier, Regional Manager for Karnataka and Andhra Pradesh, Joyalukkas, said buyers were cashing in on the opportunity. “For the past five months or so, gold prices have skyrocketed. For the brief time that the rates have come down, a lot of people are buying gold,” he said. Atul Jadham, Area Business Manager of Tanishq, Bangalore, said customers were using their “Golden Harvest Saving Scheme” during this period where they deposit a fixed monthly amount and at the end of that period, Tanishq gives a bonus on the total amount to buy jewellery.
Interestingly, it is not just jewellery that is hot; awareness on bullion buying has also increased, say traders. Ornaments, when resold, don't guarantee 100 per cent cash back while coins, bars and ingots do.
Reverse psychology
Some salesmen, however, speak of a reverse psychology. V. Nagaraj from Sudarshan Jewellers said that the common man expects the prices to go further down when they dip.
“When the rates are going up, people want to buy as soon as possible for fear that the rates will increase. But when prices fall, there is optimism that they may reduce further. So they wait longer,” he explains.
In the general scenario, different shops and brands advertise varied gold rates per gram. But experts warn that it is only a market gimmick. Mr. Babu says: “The common man tends to see only the rate per gram and opt for the [cheapest]. There are hidden costs like wastage and making charges.”
He said shops were expected to adhere to the “Karnataka Gold Rate”. “To avoid unethical trade practices, we fix one rate each day as per the markets, which is the minimum rate. Even though a majority follows this, there are those who violate. But as a trade body, we can only propose, not impose,” he said and added that the margin of profit is generally one per cent.