Come Akshaya Tritiya and Indian money start chasing gold, the metal that not only has efficaciously retained its value in times when other assets turned futile, but has also rewarded its investors with firm yet consistent returns, due to its distinctive characteristics like inflation hedge, crises hedge standing out.
''Soft domestic prices and the wedding season which is set to begin on this day and continue till June, are likely to perk up the demand for gold and lead to higher jewellery sales, up by around 25-30% this Akshaya Tritiya,'' said Jayant Manglik, president-retail distribution, Religare Securities.
As per another data, last year Indian investors purchased gold ETFs worth Rs 712.7 million on this festive day and this year, Religare Securities expects demand to surge by around 30-35%, as the current scenario is painting a rosy picture with price trading at a discount from the high of around Rs 35000/10gms marked in the year 2013, which is a strong positive for retail investors in the country. Along with this, as per the latest data, gold imports surged by around 94% year-on-year to a figure of USD 4.98 billion in March, owing to lower prices and relaxation of import norms by the RBI. This is also indicative of continuation of strong demand on the auspicious occasion of Akshaya Tritiya.
After giving significant returns for a decade, gold prices however have lost some sheen over the last two years, amid termination of the U.S bond buying program and persistent talks of a rate lift off for the first time since 2006. This underpinned investors' interest in dollar, dampening gold prices. However, there is likelihood that the worst in gold prices has already been discounted by the market and when the interest rates hike actually comes in to effect, probably later during the year, there should only be a marginal negative impact, he said.
Globally, central banks from Europe to China and Japan, are taking steps to ward off fears of deflation and spur growth, by introducing easing measures that may support gold prices. Meanwhile, the precious metal may get a boost due to the uncertainty that still surrounds the global economic outlook, geopolitical turmoil in the Middle East and the current rift between Greece and its lenders, on back of investors' flight to safety. Last but not the least, landed cost of gold in India is what that matters for Indian investors and with rupee on track towards losing value against the dollar, gold is likely to benefit in the near term. 'We advocate accumulation in gold at lower levels of around Rs 25,500-26,000/10gms for targets of Rs 30,700-31,200/10gms from a medium term perspective,' Jayant Manglik added.
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