BANGALORE: Investors across north and south India are selling gold assets as returns on the yellow metal higher than that of other asset classes.
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However, south Indian households have been exchanging, rather than selling, existing jewellery for newer designs.
“Yes, gold is a store of value which many investors are now looking to redeem . It is difficult to say how much money has been raised so far but families are certainly looking at selling off their family holdings,” said an official from Angel Broking. Western and northern India account for over 40% of the total Indian jewellery market . Exbanker Vijay Jain, who heads Orra, a jewellery retailer , says the maximum growth in returns on gold has been in the north. Return of gold would include both exchaning old gold for new jewellery and exchanging gold for cash. “In the north, the rate of return of gold has gone up 35%, compared to 10% growth in the south. Incidentally, we have also grown the fastest in the north as the exchange of old gold for new jewellery has been high,” he said.
Industry sources estimate that redemption into cash forms about 5% to 7% of the total transactions. “With bullion prices rising, Indians are becoming astute and willing to redeem their holdings or exchange,” said an industry source.
In south, however, offloading of family gold has not been that strong. Princeson Jose of Chennai-based Prince Jewellery says: “South India is more investment-driven and we haven’t people redeeming their jewellery into cash,” he adds.
India’s annual consumption of the yellow metal - the largest in the world - is 800-850 tonnes of which close to 150 tonnes to 200 tonnes is accounted for by recycled gold. Thanks to sky-high prices, bullion imports were virtually zero in February 2009.
