Rapaport Magazine

India

By Zainab Morbiwala
Price Drop Spurs Gold Sales

It is raining gold in India! Consumers have reacted to the steep fall in the price of the yellow metal by staging their own gold rush and buying up the precious metal in all forms, whether jewelry, coins or bars. An additional incentive for the Hindu community to go gold shopping was provided by its Akshaya Tritiya holiday on May 13, which is considered an auspicious time to purchase gold. Despite the fact that everyone was focused on gold in May, the overall diamond market remained positive, with no gloomy news or incidents to spoil morale.

Gold Dynamics
   After having been traded at prices higher than $545 per 10 grams, it was shocking to see gold prices drop by almost $100 to around $450 per 10 grams. Speaking exclusively to Rapaport Magazine, Harish Soni, chairman, All India Gems & Jewellery Trade Federation (GJF), said that in line with the current investment market trends, “funds are moving toward the equity market, which has brought down the prices of precious metals. In addition, because of the economic slowdown in European countries, the European market is selling its gold stock, which is another prime reason for the drop in price.” Soni predicted that “After 12 years of a bullish market, gold and other precious metals are moving toward a bearish market.”
   “April 2013 saw imports of gold worth approximately $7.5 billion,” continued Soni, higher in comparison with the previous year. But he cautioned that continued import growth “largely depends on government policies toward the trade. As a point of concern, with the introduction of the Reserve Bank of India (RBI) policy restricting the import of gold on a consignment basis, the continued growth in gold imports is going to be adversely impacted.”
   Soni shared some statistics with Rapaport Magazine on the huge growth in gold imports since 2001-2002, when they totaled $4 billion. By 2010-2011, they totaled $49 billion, rising to $56 billion the next year and declining to $50 billion in 2012-2013. In terms of the overall consumption pattern, gold investments represented 26 percent of the mix in 2009-2010 and gold jewelry 74 percent. That distribution had changed to 36 percent for investment and 64 percent for jewelry three years later.

A Look Ahead
   Despite all the attention being paid to gold in May, Soni described the gems and jewelry industry as one of India’s “fastest-growing industries and one that contributes greatly to the total exports of the country. This industry is engaged in sourcing, manufacturing and processing of precious gemstones, precious diamonds and precious metals.” Noting that “the current fall in gold prices and the approach of the wedding season are the main reasons for the escalation in demand for 22-karat gold jewelry in the Indian and Asian markets,” Soni emphasized that “demand for diamond and colored gemstones remains steady.”
   Vipul Shah from SRK Exports doesn’t expect the fall in the price of gold to have much impact on the diamond industry, although he does see “an impact on sales of plain gold jewelry.”
   Like Soni, Shah is very optimistic about the future of the gems and jewelry industry, noting that domestic demand within India is increasing. “We see the market moving toward the establishment of exclusive chain stores to sell jewelry,” he said. “Internationally, the U.S. is showing stable and positive demand.”
   Commenting on demand for diamonds, Soni shared that demand is good for SI-plus clarity, I to F color and excellent cut. Strongest demand, he added, was for VS clarity and G to H color.

Show Time!
   The Basel Show has always been a crowd-pleaser and one of the most anticipated events for the industry. “Over the years, the Basel Show always has been considered a premier show and one-of-a-kind, especially for the showcasing of watches, jewelry and luxury products,” said Soni. “Its scale and reach is unmatchable, which makes it unique. It is indeed a great platform for business.”
   In commenting on this year’s Basel Show, Soni noted that “the show had reduced the space for jewelry and participation was dominated by Asian countries, especially India, China and Thailand, with less participation by European countries.” He said the exhibition of watches at Basel was especially strong this year, with all the leading companies across the globe exhibiting their latest products.
   Soni said he is optimistic about the 2013 Vegas show, “which is also a premier show providing opportunities for business and networking and showcasing the finest and broadest collection of gems and jewelry.” Shah was similarly optimistic about Vegas, based on the fact that “the U.S. economy is growing and even the recent employment index was better.”

Article from the Rapaport Magazine - June 2013. To subscribe click here.

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