'Gold coins are attracting a new class of investors'

TRADE TALK: Dharmesh Sodah

Dharmesh Sodah, director of the World Gold Council, talks to Tejal A Deshpande about the trends in the Indian market. Excerpts:

How do you see the demand in the domestic gold market?

Last year, the market witnessed a volatile price fluctuation between April and September. However, looking at the current sentiments, it seems a similar situation will not be repeated this year. The demand for gold in the first quarter (calendar year) surged by 50 per cent.

There was a good demand on the Akshay Thritiya day and the second quarter seems strong if prices don't fluctuate excessively.

What are the trends in gold demand?

Since the last three years, there has been an increasing demand for gold coins and bars, which has created a new segment in the market. Gold coins and bars are attracting a new class of investors with a long-term perspective.

With surplus income, overheated stock markets and a booming real estate sector, investors have started allotting a certain percentage of their protfolio for gold. Similarly, expanding distribution channels, with banks and financial institutions offering gold coins, are drawing new customers.

How will exchange-traded funds (ETFs) impact the market?

ETFs have provided an alternative investment option apart from jewellery, gold coins and bars. Besides, ETFs have allowed the entry of institutional players and enabled them to look at gold as a dematerialised form of investment.

Though ETFs are at a nascent stage, the demand for them is expected to grow as it has made gold more accessible. They have made gold trading on exchanges possible, thus resulting in increased liquidity. Demat has addressed the issue of holding gold in physical form. Gold coin purchases from banks come at a premium. ETFs have brought the premium down further.

Is the World Gold Council planning any new promotional programmes?

The recent Akshay Thritiya promotions have been successful in generating demand for gold. This year the council's key focus in the Indian market will be the youth.

This segment is easily influenced by other competing sectors such as white goods and apparels. Perhaps jewellery has not kept pace with the changing lifestyle and lacks in addressing the youth.

The council, along with our partners, will work on creating a brand proposition for the youngsters and undertake advertising and other communication activities to target this segment.

What trends do you foresee in the domestic branded gold jewellery segment?

The branded gold jewellery market may see the entry of more players in the plain gold segment as it consituites 84 per cent of the Indian jewellery market. It will take some time for the Indian consumers' mindset to change and make brand purchases as they conventionally buy gold from traditional jewellers.

However, the advent of organised retail is set to change jewellery retailing in the country.