Faced with stagnating demand for gold as an investment in the third quarter of the current calendar year, the Indian arm of the World Gold Council (WGC) is planning to engage pan-India jewellers to redeem the metal’s investment product into jewellery.
On Thursday, an investor has to sell gold’s investment products like coins and bars; and buy jewellery afresh. In the process, as many claim, customers lose money as they need to sell investment products at a discount and buy jewellery at a premium. Over and above, they need to pay 10 per cent additional money as making charges. Therefore, the entire transaction costs investors 15-18 per cent more.
The new initiative by WGC will, however, allow investors to transact business at an additional cost of five-eight per cent only.
“We are working on the details of such possibilities. But, the proposal will be operational only after 12-18 months,” said Ajay Mitra, managing director (Asia Pacific), of WGC.
Mitra, however, denied to put a number of total retailers WGC plans to engage. But, he confirmed that the system would be opreational throughout the country. “Talks are already on with jewellery retailers across the country which will be finalised by March 2011,” Mitra added.
Meanwhile, he clarified that customers will not get any discount in gold prices from these authorised shops. Gold prices will remain the same as prevailing prices as declared by the benchmark London Bullion Markets Association (LBMA).
The objective of this initiative is to create a quality standard across the country to bring consumers’ confidence towards both jewellery and investment products.
After an emphatic growth in gold investment demand in India in the first two quarters of the current calendar year, investors were found skewed towards jewellery buying in the third quarter. As a result, investment demand of gold stagnated in the third quarter.
“Additional disposable income can only be invested in coins and bars, which other than resale and store value, have no benefits. While jewellery can be used for both for adoring and storing in the safe,” said a Mumbai-based retailer.
If redemption option is available for investors, the demand for both coins, bars and jewellery will increase phenomenally, he added.
India’s net retail investment demand of gold rose a marginal one per cent in the third quarter of the current calendar year to 45.1 tonnes. In the first nine months, however, investment demand of gold rose a staggering 108 per cent to 136.9 tonnes from 65.8 tonnes in the same period of the previous year.
Jewellery demand, meanwhile, during the third quarter rose 36 per cent to 184.5 tonnes in the third quarter of this year from 135.2 tonnes in the same quarter of last year. Total gold jewellery demand remained robust recording a rise of 73 per cent at 513.5 tonnes in the first nine months this year as against 297.2 tonnes in the corresponding period of the previous year.
