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Gold guards ?em against bear hug!

A LARGE number of High Networth Individuals (HNIs) in the city have really laughed away the current downward rally in the stock market. The reasons for their composure during a massive liquidity crunch in the capital market is not very difficult to find out.

india Updated: May 22, 2006 01:00 IST

A LARGE number of  High Networth Individuals (HNIs) in the city have really laughed away the current downward rally in the stock market. The reasons for their composure during a massive liquidity crunch in the capital market is not very difficult to find out.

A third of these HNIs  started buying gold bars three months back to hedge against an imminent fall of the BSE Sensex anytime in the country. And as the inevitable happened with Foreign Institutional Investors (FIIs) pulling the plug on Indian bourses, jewellers in the local bullion market here were already flush with orders not for making gold jewellery but 1 kg gold bars each costing approximately Rs 5 lakh.

“Gold bars have contributed significantly to the rise of daily turnovers of bullion markets during the past few months across Uttar Pradesh. The collective daily turnover of the state’s bullion markets in value terms is currently in the range of Rs 250 crore to Rs 300 crore onsidering only the sale of  1 kg gold bars in the state with Lucknow contributing about Rs 50 crore per day,” Om Prakash Agarwal, President of UP Sarafa Federation told HT Live.

On the other hand,  the sale of  24 carat and standard gold jewellery items have witnessed certain amount of  sluggishness due to high retail cost of the yellow metal. The total weight of gold bars being sold in Uttar Pradesh from various bullion markets could be in excess of  500 kg per day”, he said.

“It is no gainsaying the fact that gold jewellery as an investment option would always remain on the list of  gold buyers anywhere in the country. However, purchasing gold bars had been a priority with many HNIs during the past few months as it has re-emerged as the only reliable asset against investing in stocks”, he said.

However, the smaller jewelers had been badly hit by the rise in gold prices internationally as input costs for making jewellery had been rising rapidly. “These smaller jewelers across bullion markets in the state cannot afford high gold prices”, Agarwal said.

 Most of the gold requirements of the Indian markets are being met by gold being supplied by dealers in London or Australia. The rally in gold prices are unlikely to stop in future as demand for the metal is very high in the global markets, he added.