MUMBAI (Commodity Online): Come September, all eyes are India’s gold market to know which way the price will move.
In fact, September has been the best time to buy gold in terms of its month-on-month price appreciation over the past four decades. Statistical data from 1969 till today do not show otherwise, and so this time round ironically, gold comes into the limelight at a time it’s always been sought.
The post-monsoon wedding season in India and Diwali, one of the country’s most important festivals lead to a major increase in gold demand. Gold is restocked by jewellery makers who are preparing in advance, for the Christmas shopping season in the United States.
The holy month of Ramadan, which comes to an end by late September this year and is subsequently followed by Eid, sees a tradition of exchanging gifts on a large scale as a mark of celebration all over. Similarly, in China, the week-long National Day celebration starting from October 1 and the lead-up from then on till the Chinese new year, always fuel gold demand in China as well.
This year could see a challenging September in India, as the economic slowdown and gold prices, which were near record highs, had driven jewellery demand down by 31% in the second quarter, as compared to the same period last year.
World Gold Council (WGC) said India’s bank deposits saw 22% year-over-year growth in the second quarter of 2009, so cash is available to be spent if the rupee price for gold weakens even slightly. The WGC also expects the wedding and Diwali season to underpin a seasonal improvement over the remainder of 2009.
China, the world’s second largest gold market, on the other hand, saw a year-over-year gold demand increase of 6% in the latest quarter, with buyers favouring 24-carat gold jewellery for its quality and as a store of value. The WGC says that trend toward the purer form of gold should continue, through the third quarter.
With the festive season approaching, the demand for gold on the outside primary markets has gone up as well. The Indian investor’s mood suggests that they now feel that gold will increase in price. So far gold had been range-bound, but now it may not remain that way much longer. Most financial advisors and portfolio managers are of the opinion that one should hold gold as an asset class and at least dedicate between 5-15 or 20% towards it.
Again September as a month is good for business, since the period from 5-19 of this month is Shradh and some people consider it disrespectful and inauspicious to purchase gold during this time, retail buying of gold has taken a back seat as of now.
While facts, figures, numbers and historical data all predict that gold is going to have another wave of price rises and increasing demand this September and maybe for the coming time frame after that. Prudence is still a better route while cashing in any windfalls your gold portfolio may make it a good idea, skewing one’s overall portfolio to favour more than 20% or so of gold.
This could be counter-productive as, only last year most investors only painfully learnt that history is not the answer to the future, as things we may not have considered can always occur. Financial advisors are very much in tune to the idea of gold being a good investment choice, but they too are weary of becoming over-dependent on it and rather use it as a safety net for their clients.
