Shree Janki Jewellers – a gold outlet in Delhi’s Laxmi Nagar neighbourhood has been busy sending texts to its customers after reopening the shop when the lockdown caused by the Covid-19 pandemic was relaxed at the start of June.
The shop had remained shuttered for the whole of April and May as part of government's measures to prevent the spread of the pandemic.
Owner Rajesh Garg told Sputnik that the shop now opens every other day, and that customers are making enquiries about buying gold despite the price of the yellow metal shooting up, as people consider it as a safe hedge against uncertainties in the stock market, low interest rates and construction risk in the real estate sector.
Gold prices are skyrocketing in the international market as well. On expectations of greater stimulus from the Federal Reserve, the spot prices of the yellow metal topped $1,800 per ounce and is currently trading at $1,813.30 per ounce.
Experts and analysts feel that the gold price in the domestic market is likely to stay firm. “Customers are comfortably buying at the current rates as they are aware that the rates are going up. They are also aware of the fact that the pandemic situation will also continue. However, ever since the gradual opening up of the economy after the lockdown, buying interest is visible. Request to repurchase gold is not even 25 percent of what it used to be in the past. Buying interest is more,” Nitin Khandelwal, the former president of the All India Gem and Jewelry Domestic Council told Sputnik.
"A technical correction is long overdue. But it is not that the prices will come down to significantly lower levels. After a minor correction, the prices will again rise,” Khandelwal added.
Kotak Bank analysts feel that gold may rise at least 10 percent from current levels, with the global economic situation helping the commodity.
“Gold could rally another 10 percent in the next six to nine months. Rising US-China trade tensions, negative real rates by the central banks and fallout from the Covid will drive gold prices, which are already up 41 percent year on year,” said Shekhar Bhandari, Senior Executive Vice President (global transactions) at Kotak Bank.
According to Kotak Bank, demand for jewellery has improved in the Indian states of Karnataka, Tamil Nadu, Kerala and West Bengal.
Other investment options are not as lucrative, at least for now. Interest rates on small savings like public provident funds and fixed deposits have come down since April this year. Against interest rate of 6.4 percent on fixed deposits during pre-pandemic times, India’s largest public sector lender, State Bank of India is now offering interest rates of just 5.1 percent.
Similarly, the rate of interest in the much sought after Public Provident Fund was cut in April to 7.1 percent compared with 7.9 percent previously. Equity mutual funds saw their worst inflows in four years in June at just INR 2600 milion ($34 million).
India is the world’s largest buyer of gold, with annual imports of between 800 and 900 tonnes.