It is true for Indians: All that glitters is not gold. Despite the approaching festival and marriage season, Indians — the world's biggest consumers of gold — are not rushing to buy the yellow metal, which hit a 28-year-high this week.
They have an increasingly new favourite in investment options, the stock markets, which despite their volatility, are yielding stronger returns. Gold prices rose by Rs 100 to Rs 9,610 in the bullion market on Friday to regain its six-month peak, buoyed by a steep rise in prices of the precious metal in the global market.
"People are investing more and more in the stock market. The demand is very low. While around 700-800 kgs of gold were sold per day the same period last year in Mumbai, it is not even 100 kgs this time around," said Suresh Hundia, president of the Bombay Bullion Association.
Despite rising prices, gold sales have shrunk sharply. Gold prices have gained more than 10 per cent in just two-and-a-half months, moving from Rs 8,595 per 10 grams on July 2, 2006, to Rs 9,499 per 10 grams in the spot market on Friday afternoon, according to the data available on the Multi Commodity Exchange.
During the same period, the benchmark Sensex of the Bombay Stock Exchange rendered a higher return, gaining 13 per cent from 14,664 points to close Friday at an all-time high of 16, 564.23 points.
"The markets are offering better returns when compared to gold. I see people are not even interested in buying gold exchange-traded funds. They need higher returns and thus invest in equities," says Chitra Potdar, a certified financial planner.
However, jewellery makers are pretty optimistic, thanks to non-resident Indians and foreign tourists. They expect the demand for gold jewellery to pick up towards Diwali.
"The festival season is near and there is no much change in demand for jewellery," admitted Kamal Surana, chairman of Surana Jewellers. "But we expect good buying interest from NRIs and tourists in the coming months," he added.