Gold has always been the most precious metal for Indians. From time immemorial it has been a prized asset for women. Amassing the yellow metal at homes is considered as a great investment. However, gold consumption and accumulation patterns are changing which was elaborately discussed by industry professionals at the Free Press Journal (FPJ) - BSE conference.
5 important takeaways from the event:
1. Change in gold consumption patterns
The panellists unanimously agreed that there is a change in gold consumption patterns with most Indians. Ranjit Singh, Products and Business Development, BSE stated, “The earlier trend of buying jewellery (as an investment) has seen a shift, towards purchasing of gold coins and buying bars, doing ETF trading and futures contracts etc.” “People are buying digital gold instead of jewellery. There is a lot of investment that has come to digital gold,” he added.
2. How to predict gold prices?
Kunal Shah, Head of Research, Nirmal Bang Commodities said that if one has to predict gold prices they should understand the two aspects of gold—love demand and fear demand. “When prices of gold rallied, love demand was in evidence. After a decade you saw this humongous rally, and thereafter the love demand in India and China is significantly down. Fear demand always drives gold, especially when there is crisis and uncertainty,” Shah said.
3. The industry mustn’t get caught in short-sightedness
Speaking about heavy taxes on gold in India, Somasundaram, PR, Managing Director, India, World Gold Council (WGC) said that we shouldn’t be caught up in short-sightedness. “As an industry, we need to move from mundane discussions… There should be a structure to the industry that has a strategic data production unit and another unit that handles operational difficulties of the industry,” he said.
4. Need for a board to meet the government
“We need to have our own board and go to the government with the right set of recommendations,” Somasundaram said. He added that as an industry, we have not been able to form a very professional structure where we could present reliable data and economic logic.
5. Gold stocked at home is a non-financial asset
CARE Ratings’ Chief Economist, Madan Sabnavis stated gold in India is not just a commodity, but also a non-financial asset and a financial asset. He added that if gold is in the form of ETF and gold monetisation scheme then it is a financial asset. But if gold is stocked at home then it is a non-financial asset.