Gold rush

Shivli Tyagi / TNN / Apr 15, 2006, 20:41 IST

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Gold prices have touched a record high. We ask if this is the right time to buy more gold or sell off that chunk.

Gold prices have touched a record high. We ask if this is the right time to buy more gold or sell off that chunk.
All that glitters... is indeed gold! Skyrocketing prices of the yellow metal have sent both jewellers and sellers into a tizzy.
Last week the price of gold shot up by 17 percent to almost Rs 8700 per 10 gm, recording the sharpest rise in price in over two decades.
The chances of gold prices falling soon is as high as India losing to Bangladesh in a test match or the Sensex going back to its 7000 days.

And so it's perhaps the right time to decide whether to sell grandmom's jewellery or invest in more gold.
When Rita Kumar got married in 2000, gold was priced at a modest Rs 4,400 per 10 gm. Cut to 2006 and Rita can't hold her glee in knowing that her investment then, has almost doubled!
"My mom had gifted me around Rs 2.5 lakh worth of gold jewellery then. Now with the price hike, I'm happy that the same gold is now worth Rs 5 lakh."

Economists and market analysts predict the price hike is due to an increased volatility in the market which has become more frequent in the last six months.
No wonder then that the demand for gold has dropped by a sharp 50 percent. Dilip Sakhwala, a jeweller, says: "Even though this is the marriage season, there is little demand for new jewellery. People are waiting for prices to fall. But what they don't realise is that this hike is based on international trends like the weakening of the US dollar."
In fact many jewellers are advising consumers to 'buy before prices go up further'. "Buyers need to understand that gold prices won't drop below the 8000 mark under any circumstances,"advises jeweller Mahendra Zinzuwadia.
However, economists don't see this trend carrying on in the long run. Prof Erol D'souza says, "I don't see this price level continuing for too long.
Most of the gold reserves are with the banks and if that gold comes into the market there is bound to be a drop in prices."
The fluctuating price is affecting the gold stocks too. Dharmendra H Zaveri, a bullion trader says, "Trade has been severely affected.
The turnover is down to Rs 100 crore a day, from about Rs 500-600 crore. No one can gauge whether gold prices will rise or fall.
Therefore there is a lot of speculation in the market. All that we are doing is maintaining the gold stocks that we have. As of now I don't see the prices stabilising."
Optimists feel the prices will settle down, but only after a further rise. As Zaveri says: "Other precious metals like silver, copper, palladium and platinum have seen a bigger price hike (almost by around 100 percent) than gold. Gold is just enjoying its turn."
But with the middle class suddenly finding gold well beyond their budget and thus, staying away, jewellers are dreaming
up new schemes to lure them back.
Madhur Matta, a salesperson at a popular jewellery store says, "We want people to realise that even though prices are high, it is still wise to invest in gold. It has assured returns. The new schemes are a must as it's tough on us if the sales drop so drastically."
However D'souza feels there is no need for people to go on a gold buying spree simply to invest. "Unless one is willing to hold up for a month or two and then shift the liquidity elsewhere, investing in gold doesn't make sense. By and large gold doesn't see large enough fluctuations to give high enough returns,"he says.
shivli.tyagi@timesgroup.com

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