Report: Investment Demand to Lift Gold Prices by 7-10% in Q3

October 8, 2012 at 08:31


Gold as an investment instrument is likely to see a 7%-10% growth in the October-December quarter largely driven by festival demand. Investment in gold exchange-traded funds (ETFs) is expected to increase a shade over 7% as compared to a 5% growth in the last quarter.

Bullion dealers and jewellers say demand for gold coins and bars is expected to grow by 10% in the third quarter of FY13 and investors who were shying away from the market due to a rally in gold prices have returned to the market in the last 4-5 days as prices have fallen to Rs 31,500 per 10 gm due to a stronger rupee.

Talking to ET, Mohit Kamboj, the newly-elected president of Bombay Bullion Association, said: “In the last five days, we have seen that big investors have returned to the market and are buying coins and bars of all denominations.

There is renewed interest among this class of investors as prices have fallen.” Dealers say buying will increase further during the Navratri and Diwali periods if the rupee strengthens against the dollar.

Even though international gold prices have gone up in the last fortnight from $1,760 per ounce to $1,780 per ounce, Indian prices have declined as the rupee is hovering around 51.80 compared to 55 a month ago.

Even though retail investors are slowly returning to the market, a large section of Indian consumers is not making any purchase yet because the period from October 1 to October 15, known as “Shradh Paksh”, is considered inauspicious in Hindu mythology.

Ketan M Shroff, director of Penta Gold, a bullion and jewellery firm, said retail investors are coming back. “They are largely buying gold coins and bars of all denominations. Three years ago gold used to be around 5% of a person’s asset portfolio. Gold, whether in physical or paper form, constitutes 15% -20% of his portfolio today. The metal has given a steady return of nearly 20% in the last three years. Demand for gold coins has already gone up by 10% and we are ex-pecting it to go up further.”

Gold exchange-traded fund AUM (asset under management) rose 5% or by Rs 500 crore to Rs 10,600 crore during the quarter ended September 2012 due to a rise in gold prices. Gold ETFs have gained up to 12.90% in the last 12 months.

“People are investing in gold ETFs and we are expecting a conservative growth of 7%-10% growth in gold ETF portfolio this festival season. Our expectation is that gold as an asset class will register a 10%-12% rise in the next three months. The demand for paper gold is expected to go up over the next few months,” said Lakshmi Iyer, head of products & fixed income, Kotak Mutual Fund.