Business Standard

Gold offers negative returns

Price declines 4.7% in Samvat year 2069 due to supply curbs, low consumer interest in buying

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has offered negative returns for the first time in fifteen years due to the government's crackdown on its imports to control the current account deficit (CAD).

With a price decline of 0.5 per cent or Rs 140 on even on the last day of the Samvat 2069 (ending Saturday), standard gold price in Mumbai's recorded a 4.7 per cent decline during the entire Hindu calendar year from the level of Rs 31775 per 10 grams a year ago.

With the steepest fall in 15 years, silver with its close at Rs 49795 a kg, offered 20 per cent loss to consumers this year. The white precious metal had offered 14 per cent negative returns to buyers four years ago in 2064.

"There are many first to gold's credit that can be attributed to the negative returns," said Gnanasekar Thiagarajan, director, Commtrendz Research and added that government for the first time curbed its import to control CAD.

Gold import at 23 tonnes has been the lowest during this period, resulting into the highest premiums to consumers. Currently, premiums in gold are hovering between Rs 1,000 and 1,500 per 10 grams, the level never seen in the past.

Gold offered around 19 per cent returns in 2068 followed by a handsome over 25 per cent positive returns in the previous three years. (MUTED SHOW)

Bullion sales remained gold spending in bullion products, including coins and bars, assuming that the ease in gold imports may intensify its supplies and reduce premiums thereupon. Earlier, consumers were investing for long term in bullions assuming that the returns will remain positive, said Haresh Soni, Chairman of All India Gems and Jewellery Trade Federation (GJF).

Now, the returns euphoria has evaded. Had current prevailing price been at the cost level, gold price would have been at Rs 29,500 per 10 grams or even less.

Today, consumers are a bit apprehensive. With the price sustained a declining trend and more so, gold buying not just been an occasional ones, buyers abstain from quantum purchase being their price sensitiveness. Also, there is no clarity on government policy which can set a signal for gold prices.

According to Ashok Minawala, ex-chairman of GJF, consumers' sentiment has revived. There has been no change in Indians' aspiration towards gold. With the possibility of government's ease on import curb, consumers will bounce back to gold market which may turn investors' returns.

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