Last Updated : 11 November 2009 at 15:15 IST

Turmeric pips gold to the post in returns!

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KOCHI (Commodity Online): And you thought gold is the best thing one could invest during the times of recession. Then think twice. There are some other better options like turmeric which is giving far higher returns to investors in a period of six months.

According to a report appeared in the Economic Times, India’s leading business daily, between June-end and October-end, the front month gold futures has generated a return of 10%, while that of turmeric has returned nearly 100%.

Again, during this period, the price of gold climbed to Rs 15,915 from Rs 14,451 per 10 gm, while that of turmeric zoomed to Rs 10,476 from Rs 5,246 a quintal (100 kg).

But, there were difficulty for investors to put their money in turmeric because the volatility was very high for the spice.

While India is a price-setter in the case of turmeric, it is a price-taker in gold, which vests price control of the former in the hands of a few as against a much broader participation in the gold counter.

In the comparative period, average daily volatility of turmeric was 2.71% either way while that of gold was 0.56%. The issue was that each time the spice hit a high, investors cashed out in the belief that prices would not sustain at those levels...like when it touched 6k it was perceived to be the peak... at 8k it was seen as overdone, etc.

This changed the holding pattern and would have effectively capped the gains when compared with gold, which investors hold on to for a longer period and even roll over their positions where both cost of carry and brokerage work out to a fraction of a percentage point, said the ET.

Most farm commodities are seasonal in nature and can easily be affected by supply-demand disruptions, which reduces the period of time they can be held.

While gold has steadily been rising on the back of a weak dollar and a speculative frenzy driven by cheap money plentifully available in the developed world, which has been finding its way into commodities, among other assets, poor monsoon winds in July and August, followed by floods in October, led to fear of low turmeric production and increase in prices.