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Magazine
Eternal sheen of gold
MADHUMITHA SRINIVASAN
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Akshaya Tritiya, which falls on April 27, is the traditionally auspicious day to buy gold, especially in the South. While the recession has had an impact, it also has made gold a more attractive investment proposition. The glitter remains as attractive as ever ...
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Photo: Paul Noronha
Get that glitter....
It’s that time of the year again when all that glitters is invariably gold. It’s Akshaya Tritiya — a time when people in South India, irrespective of beliefs, seize the opportunity to purchase a portion of the precious yellow metal, proportionate to the size of their wallets and the retailers are only more than happy to help them do so.
Gold in India enjoys an envious status; it’s a part of our culture, lifestyle and even religion. So buying gold with our spare money would only seem like the natural thing to do, but it has worked out positively for us Indians, because gold is also a good investment option that must feature in everybody’s investment portfolio. Because “at a time of economic disturbance the world over, gold is considered as a safe haven for investing in,” observes Balaji Vishwanathan, Marketing Head, Kirtilals, like it has proved itself over the years in history. It can be sized down to fit our budget and can be easily liquidated when in need. And Vummidi Gautham of Vummidi Bangaru Murali Jewellers adds to the list: “Gold is relatively stable, you can trade it in with anything, it’s universally accepted and can also be mortgaged.”
The recent economic meltdown has only strengthened people’s confidence in gold as other investment options like shares and mutual funds are quite unstable at the moment. “In this recession, countries and companies are now putting their money in gold and that would explain the rise in the price of gold,” clarifies Princeson Jose, Chairman and Managing Director, Prince Jewellery.
Irresistible
But investment or not, peaking prices or otherwise, gold will be bought. “I buy gold mainly to save up for my daughter’s wedding. It is an important part of our weddings and it is also a symbol of status,” says Subashini Arumugam, homemaker. And agreeing with her is Sanhita Basu Goshe, who reveals that she started saving gold for her daughter from the time she was born. “Because it also serves as a security for her after marriage and is a good investment,” she says. “And Akshaya Tritiya is celebrated with as much fanfare in Kolkata, my hometown, as it is here. At least here, people use what they buy.”
Year after year, Akshaya Tritiya has only grown larger in significance and scale in Tamil Nadu, especially Chennai, thanks to the adept marketing masterminds.
“I am the culprit!” confesses Princeson Jose while discussing the relevance of the Indian version of the gold rush. “About seven years back, I noticed that the store was crowded on one particular day and found that it was an auspicious day when whatever was bought is said to multiply and so many people bought gold. And that struck me as a good marketing idea and the next year we marketed Akshaya Tritiya and it worked,” he shares.
It is a known fact that, on Akshaya Tritiya, gold sales soar when compared to the relatively steady graph the rest of the year. But what’s the scene like this year, when recession and soaring gold prices decide to play spoilsport?
For some like Geetha Loganathan, a teacher at a private school, the price is not a deterrent. “It’s time I start being nice to my husband. But seriously, it wouldn’t hurt to buy a little gold on what is considered an auspicious day. The prices don’t worry me, though. Even if it hits rock bottom, I wouldn’t rush to buy gold because I only buy when I need it,” she states.
But A.S. Natarajan, realtor, thinks otherwise. “I will always go for land. Scarcity defines the value for gold and it has only ornamental value. Whereas in real estate, contrary to what people think, the price of land doesn’t really free-fall. It only keeps rising, attains a plateau and rises again. But, yes, gold is a good investment option for the middle class who can buy gold relative to the money available at hand.”
“We expect to do good sales this year, not to the extent of last year though. The walk-in will be good and we have to be content with whatever sales we make this year, looking at it in the light of bad economic conditions and high prices,” predicts Vummidi Gautham. Akshaya Tritiya is building up to be a glittering event this time round too.
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Reasons to invest
PHOTO: BIJOY GHOSH
GO GOLD: K. Shivram, Vice President, World Gold Council.
It isn’t just the global economic meltdown that is affecting the price of gold, there are a lot of geo-political reasons that come into play. “Russia and China are buying gold, weakening of the dollar and the supply of gold is also under pressure. There has been a three per cent decline in mining supplies,” explains K. Shivram, Vice President, World Gold Council. And yet, “It is definitely a good time to buy gold. Gold over the past couple of years has given a ROI of more than 28 per cent. And people’s faith in gold has only increased in recent times,” he says.
Gold provides a steady means of protecting wealth and enhances the consistency of returns.
Portfolio Diversification: Adding gold to an investment portfolio introduces an entirely different class of asset. Gold is unusual because it is both a commodity and a monetary asset and is an effective diversifier because its performance tends to move independently of other investments.
Dollar hedge: Gold is often cited as being an effective hedge against fluctuations in the U.S. dollar. If the dollar appreciates, the dollar gold price falls and similarly a fall in the dollar relative to the other main currencies produces a rise in the gold price.
Gold is durable: Unlike many of the other commodities examined, other things remaining equal (i.e. assuming no changes in price), there is no depreciation in the value of gold, other than any storage costs that might apply.
Inflation: The purchasing power of gold has not diminished since Biblical times. Market cycles come and go, but gold has maintained its long term value.
Currency reserve: Gold is still considered an important reserve asset by most central banks, even though it is no longer the centre of the international financial system.
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