Mumbai: Record-high gold prices ahead of the auspicious Akshaya Tritiya festival have taken the sheen off the yellow metal, prompting many Indian jewellers and traders to shift focus to sales of small-sized gold coins and bars.
“I have minted several kilogarms of more small coins compared to large coins last year looking at the prices,” said Haresh Acharya, head of bullion desk with Ahmedabad-based wholesaler, Parker Agrochem, which sold 200 kgs of the yellow metal during the last gold-buying festival.
India’s festival sales last year stood at 45 tonnes and traders expect a more-than-50% drop this time as record prices are seen denting demand.
Akshaya Tritiya, which falls on Sunday, is an auspicious gold buying festival, when consumers buy to invoke lasting prosperity. The next gold buying festival, Dhanteras, is in November.
“Prices are at their record highs, purchasing power has gone down on high inflation,” said Pinakin Vyas, assistant vice-president with IndusInd Bank, a large gold importer.
Gold on the Multi Commodity Exchange (MCX) touched a fresh record of Rs18,339 on Friday, breaching the previous record of Rs18,294, struck on 3 Dec last year.
“Since last two years, we have seen an upward moment in prices and even imports are not encouraging, one has to see alternate options,” said Vyas. “One (consumers) will have to look at lower denominated coins according to the need.”
India’s inflation, which has been in double digits since many months, has curtailed the purchasing power of consumers, adversely affecting savings.
Gold imports into India in the first four months of 2010 were at 126 tonnes, up 74% on year, provisional data from the Bombay Bullion Association (BBA) showed.
Demand had revived in India in the first quarter till March after a dismal performance in 2009 when the worst monsoon in 37 years lowered gold sales, pulling down imports to 339.8 tonnes in 2009, down 19% from 2008.
But this sudden spike in prices amid global financial worries and inflation concerns, could dent festival demand, traders say, pushing them to focus on smaller-denominated trinkets.
India’s gold investment demand contributes to about 30% of the total demand.
Union Bank offered a 5-gram coin at Rs9,956 while a 10-gram coin was offered at Rs19,912.
Jewellers have been giving disounts to entice consumers to purchase the yellow metal for Akshaya Tritiya even as high prices are seen taking a toll on sales.
“Discounts are the only way out to lessen the burden,” said Acharya.
Among others, retail jewellery chain, Tanishq, is offering 100% discounts on making charges.
“Discounts are almost ten dollar (per ounce) to international prices yet scrap is being flooded,” said Daman Prakash, director of Chennai-based MNC Bullion.