Gold Rate : The yellow metal that has inspired awe among humankind for millennia is taking the news spotlight again — and for reasons that don’t bode well for prospective buyers.
Gold prices have seen a third spike this month, posting meteoric rises and causing some to reconsider their investments and purchasing plans.
Yesterday afternoon, I had gone to see Sharma Jewellers in Delhi’s Karol Bagh market to see owner Vikram Sharma busy updating price tags on his display pieces.
“Twenty-two years in this business, and I’ve never seen anything move so fast,” he said to me, shaking his head as he carefully placed a heavy gold necklace back in the display case.
“People come in with budgets formulated on the prices they purchased at last week and walk out with an empty tank when they hear today’s prices.”
Table of Contents
The New Gold Rate List
Gold rates today (9 January 2020) have been hiked in all the major cities today. Here is the current rate for 10 grams of the metal:
24 Karat Gold (99.9% purity)
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Delhi: ₹84,650 (up by ₹1,250)
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Mumbai: ₹84,480 (increase by ₹1,180)
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Chennai: ₹85,100 (1,320)
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Kolkata: ₹84,890 (1,290)
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Bangalore: ₹84,730 (increase of ₹1,210)
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Hyderabad: ₹84,650 (rise of ₹1,250)
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Ahmedabad: ₹84,500 (increase of ₹1,200)
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Pune: ₹84,480 (up by ₹1,180)
22 Karat Gold (91.6% purity)
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Delhi: ₹77,600 (up by ₹1,150)
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Mumbai: ₹77,450 (1,080)
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Chennai: ₹78,010 (1,210)
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Kolkata: ₹77,820 (1,180)
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Bangalore: ₹77,670 (1,110)
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Hyderabad: ₹77,600 (1,150)
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Ahmedabad: ₹77,550 (1,100)
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Pune: ₹77,450 (up by ₹1,080)
In per gram term, this means an increase of about ₹125 per gram in the price of 24 karat gold and roughly ₹115 per gram in the price of 22 karat gold.
“The problem is not just the magnitude of the increase but the frequency of it,” said Rajat Gupta, a financial analyst I spoke with at a seminar on investing in precious metals last week.
“Three times in 19 days, we see it’s going up.” That sort of volatility has both jewelers and customers on edge.”
Gold Rate Reasons Behind the Recent Increase
So why is gold rallying now? The current gold rally is the result of several inter-related factors:
Geopolitical Tensions
Recent spikes in flashpoints have become increased in Eastern Europe and the Middle East. “Gold is the quintessential fear trade,” said Priya Desai, head of commodity research at Capital Investments. “When the bombs are falling, the price of gold goes up — that’s always been the case throughout history.”
Central Bank Purchasing
A number of influential central banks, notably in emerging markets, have been buying gold in earnest. China has also said it added 16 tonnes of the metal to its reserves last month, extending a 17-month buying run.
‘Diversification away from these dollar-dominated assets is taking place in countries,” said economist Dr. Sunil Nair in our phone conversation yesterday.pnl “It’s not just about return on investment — it’s about strategic positioning in an increasingly uncertain global financial system.”
Weakening Rupee
In the meantime, the Indian rupee depreciated verses the US dollar in the past few weeks, adding to the price of gold at home. Because gold is traded globally in dollars, a weakening rupee will inflate the price for Indian buyers.
Wedding Season Demand
The demand is unprecedented because of the wedding season which is nearing even with the high prices.
“Families have put off purchases hoping for a correction in price,” said Meena Agarwal, a wedding planner who I visited at Sharma Jewellers. “Now they are forced to buy at these rates because the weddings can’t be delayed.”
Gold Rate Impact on Different Sectors
Jewellery Retailers
Jewellers throughout the country say the volume of sales is down dramatically, but not the revenue, which is being propped up by the higher prices.
“Footfall is almost down by 40 percent over last year this time,” said Rohan Soni, who works at a jewelry store in the renowned Johari Bazaar in Jaipur that his family has run for three generations.
When I stepped into his shop, which is beside the Oregon Highway 26, on Tuesday it was quieter. “People are buying smaller or lighter pieces. A bride who might have bought a heavy set a year ago is now selecting something much more delicate.”
Investors
For those who bought into gold early, the rally has yielded handsome returns. Physical gold has urged higher than the rest of the asset classes this year, and has clocked 18.5% gain from January.
“All my clients who had 10 to 15 per cent assets allocation in gold are very pleased,” said financial advisor Kavita Mehta when I consulted her about my own paltry investments.
“But I’m warning people against new big investments at these levels. What comes up this fast can come down that fast.”
Manufacturing Sector
Gold jewellery production facing a tough time as manufacturers struggling to manage between costly Inventory and uncertain demand.
“We are down to working on nearly a just-in-time-cycle,” Harish Zaveri, the owner of a manufacturing unit in Zaveri Bazaar, an enclave famous for its diamond merchants, in Mumbai, told me when I visited his plant earlier this month.
“It’s too risky to keep big stocks of gold with all these price jumps, but if we work with little stock then sometimes we cannot serve clients fast enough.”
Gold Rate Will Prices Stabilize Soon?
And most of the experts I’ve spoken to are still bearish on prices stabilizing anytime soon.
“The logic for gold prices to move higher is strong, it remains intact,” commodities analyst Deepak Khanna said in an investment webinar I watched last night. “If anything, we’re getting more reasons for prices to go up, not to reverse.”
From historical patterns of behavior, we can learn that when gold cuts through to the new price area, it has often set a new normal, rather than coming back to what now looks like the old one.
The time lags between the fall in prices and curtailed production are always short, but this time the run-up was notably swift.
“I tell my clients — don’t buy all at once,” Vikram Sharma, a jeweler, told me as he slipped a tiny gold pendant into a white paper envelope for one of the few customers in his shop.
“Go ahead and buy something right now if you have to, but you should not allocate all your funds here unless you have to do so,” he said.
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As physical gold becomes more expensive, alternatives are coming in:
Gold ETFs
Gold-priced interest exchange-traded funds have seen inflows rising almost 60% over the same period of last year.
Digital Gold
Platforms that offer digital gold have seen an increase in smaller ticket purchases, particularly from young buyers, who are beginning to invest an amount as low as ₹1,000.
Gold-Saving Schemes
Monthly gold schemes offered by jewelers wherein customers can buy gold for future use have gained popularity, but not without some risks.
“Young people in particular are considering these alternatives,” stated Neha Joshi, a bank relationship manager I spoke to yesterday morning. “They want exposure to gold, but can’t afford physical jewelry at these current prices.”
Gold Rate Looking Ahead
Anticipating wedding season ahead, analysts reckon that domestic demand will put a floor under the high prices. But a material reduction of geopolitical risk could prompt a sharp correction.
“Gold is still a critical part of the Indian household finance and Indian cultural marriage and religious events,” cultural economist Dr. Amrita Sen reminded us in conversation at last week’s Consumer Trends Conference.
“People may stay away from buying or opt for lighter designs or opt for other alternatives, but there’s no way most families can do away with gold completely.”
For the moment, it is recommended that consumers should be attentive to their needs and timing of their purchases, and maybe consider some of the alternatives to physical gold which have the same investment appeal minus the additional cost.
“The only certainty with regard to gold,” concluded jeweler Sharma with a philosophical smile, is “that there is no certainty. Unless, maybe, the price tags will need changing by me again soon.”
