Gold, mourning and dragons; from India to China

Two separate events across two of the biggest nations in the world are currently influencing the buying patterns of retail gold as well its prices on the bourses.

Author: Shivom Seth POSTED: FRIDAY , 05 OCT 2012

MUMBAI (MINEWEB) -

In India, the country plays host this fortnight to the mourning period for dead ancestors (Shraadh) in a period which is generally considered highly inauspicious for starting anything new, like buying a house, getting married or even buying gold.

In neighbouring China, on the other hand, the Golden Week holidays are on (Sept 30-Oct 7). The time is ripe for retailers to roll out the incentives, which is leading to a massive jump in sales across bullion counters.

One would have thought that the inauspicious nature of the fortnight in India would have led to a massive decline in gold sales, casting a shadow on the purchase of gold jewellery. However, the contrary is true.

Interestingly, many young consumers have decide to forgo the inauspicious nature of the fortnight and go ahead and buy gold jewellery, since prices are low. Given the fewer footfalls, jewellers are also keen to offer more discounts.

China factor

In China, retail jewellers, unlike their Indian counterparts, have no need to offer discounts or resort to similar clever marketing ploys. They have been quite busy these last few days.

Reports across Chinese newspapers indicate that sales of gold, silver and jewellery have already risen sharply and are set to climb further this weekend. At Caibai, one of Beijing's best known gold retailers, sales rose 57.6% in three days.

Though buyers have to contend with bullion that is $300 per oz more expensive than last year, hectic buying has been witnessed.

According to sales figures from the top 130 shopping malls and tracked by the Beijing Commercial Information Center, the first day of the seven-day holiday saw revenue growing by as much as 21.2% to $145 million.

Chinese customers are buying gold bars, gold ingots and other kinds of dragon-themed jewellery items.

India play

In India, gold prices falling to a new low on Friday could not have come at a more appropriate time for Manisha Kedia, a banking professional, checking out retail items at a jewellery house at Zaveri Bazar.

Manisha is getting married in November. "I bought loads of gold jewellery as soon as the prices fell before the onset of the Shradh period. Now, thanks to a further reduction in prices, I am buying more gold for my trousseau," she said.

Little realising that the younger generation was not keen to adhere to the practise of refraining from buying gold at this time, jewellers have been offering small freebies to pull in the customers.

Earlier, most gold retailers had started to get worried since gold jewellery demand had taken a hit at the start of this year's festival season in September, especially with the buying of gold ornaments. The gold coin business, on the other hand, had picked up during the same period.

"Investors buy gold coins if they sense prices are softening up. With the mourning period on, gold jewellery buying is expected to soften," said Kavilya Pritam, bullion retailer.

He added that the reverse was true at most stores with the younger populace walking in and buying gold, not bothered about the inauspicious timing. "Prices are down, and most of the young lot are not bothered about the `right' time to buy, so many are at the retail counters these days," said Javedbhai Abdul of Shah Export House.?

Gold price movements in the Indian markets have already started showing the first signs of complacency. On Friday, gold prices fell again for the fifth time in a row to its lowest level in nearly five weeks.

The main cause was a stronger rupee against the US dollar. The dollar decides the landed cost of the yellow metal. A stronger rupee against the dollar, makes imports cheaper.

The rupee on Friday touched a six-month high on strong capital inflows and a firming trend in the equity market after the Indian government unleashed a second wave of reforms on Thursday, October 4.

Analysts said the rupee has strengthened 6% since the start of September. That is what has kept the price of yellow metal subdued in the face of an otherwise firm market abroad.

At India's Multi Commodity Exchange, the most-active gold for December delivery struck an intra-day low, a level last seen on August 31, before trading 0.25% lower.

Importers of gold bullion have also been using the dip in prices to re-stock their inventory. The inauspicious period is followed by the festival and wedding season in late October in India, a country which is the world's biggest buyer of bullion. That's the period when Indians break out in a frenzy of gold buying.