Companies find new shine to gold glitter

Mid-day, By: Kiran Pandya, 14 July 2003 :

If you thought that only consumption of gold was high in India, forget it. While total consumer demand for gold in India was 575.7 tonnes out of a total world demand of 2726.7 tonnes for gold jewellery in 2002, India’s consumption is the highest at 18 per cent.

However, apart from consumption, gold output in India, the world’s biggest consumer of the yellow metal, can soar to 200-300 tonnes a year in a decade from just nearly three tonnes now as the government has liberalised the sector, an industry official said.

With the government opening up mining to the domestic private sector in 1993 and by 1999 allowed foreign investment, gold output from India is on the rise. According to Charles Devenish, chairman, Deccan Gold Mines Ltd, “India has huge reserves which could soar in ten years.”

Agrees Sanjeev Agarwal, managing director, World Gold Council, Indian subcontinent, “Indians are rewriting the rules in consumption for both its adornment and savings value.”

And realising the potential gold has, retailers such as Tanishq, Gold Souk and Pantaloon Retail are launching innovative schemes all revolving around gold.

The logic is simple – gold offers high returns when other assets like equities are not performing well or in times of war or global economic and and likewise. Trying to cash on this opportunity, gold funds may are expected to be launched in the future.

A couple of mutual funds have plans to come out with gold-backed exchange-traded funds. And depending on the nature of the fund, the retail investor will get assayed gold on redemption or an amount which is closely linked to the prevailing price of gold, if he sells it in the market.

It is also rumoured in the market, that ICICI Bank has sought Reserve Bank of India’s approval to float a gold recurring deposit scheme.

Under this scheme, the retail investor will deposit a fixed amount like any other recurring scheme. The difference is, the amount will be used by the bank to buy gold at the price prevailing on the day he deposits the money.

Over the term of the deposit, the customer pays an average price which is derived from the price that is locks in with the bank every month, and the funds is backed by gold and in the proposed deposit scheme, the investor can build the stock of gold by periodically chipping in a small amount with the bank.

No wonder gold glitters for everyone.