Sales of gold coins have proved to be a bright spot in India this year.
"Indians are buying more gold coins due to a shift in demand from jewellery to investment," says Madhavi Mehta, an analyst at Kotak Commodities.
The coin-shaped pieces of gold, sold at banks and jewellers and often embossed with designs such as the Hindu goddess of wealth, Lakshmi, have become increasingly popular as Indians look for a haven for their cash. At the same time, many shops report that this year they have seen demand weaken for gold jewellery, a less pure form of the precious metal that carries a high markup for its design and manufacturing.
Gold prices have hit record highs in India in recent months because the rupee has weakened against the US dollar, which pushes prices up in local currency terms. Consumer sentiment has also weakened amid slowing economic growth and high inflation.
India was the world's largest consumer of gold last year, but it is expected to be overtaken by China this year.
Still, data from the World Gold Council show that demand for gold coins surged by 59 per cent in the third quarter compared to the same period last year.
"As per World Gold Council data, Indian jewellery demand stood at 136.1 tonnes, while bar and coin demand stood at 87 tonnes," says Ms Mehta. "This indicates a ratio of 61:39 for gold demand. As against the third quarter of 2009, the ratio was 81:19 as jewellery demand stood at 111.6 tonnes while net retail investment was at 26 tonnes."
Gold coins, though, are not always bought for investment purposes.
"If you want to buy gold, the minimum amount in jewellery is more than what you would end up buying in coins," says Bhargava Vaidya at BN Vaidya & Associates. "If you just want to buy something you can go in and buy a gold coin."
Coins are often bought with the aim of eventually converting them into jewellery, which is an attractive hedging option if the buyer believes that prices will continue to rise, Mr Vaidya says. "Sometimes a person may be collecting a coin for him or her to change into jewellery when their son or daughter gets married."
Dimpesh Jain, the manager of Motaba & Sons, a jewellery store in Mumbai, says that demand for gold coins has increased by 30 per cent this year, while jewellery sales have fallen by the same amount.
"People have become more aware of the coins," he explains. "They prefer investing in gold coins now rather than jewellery.
But this is not necessarily good for business.
"We get a much higher profit on jewellery because of the profits on the labour. The amount of markup on coins in a very small percentage."
Across the road, Rajendra Gurjar, the owner of Gurjar Gold and Diamond jewellers, says that gold coins are "easier to sell" and represent "better value as an investment" than jewellery.
"People think that prices are going to continue to rise, and with jewellery they don't get the full value of the gold," says Rohit Jain, the co-owner of Surana Gold, another jewellery shop. "It's cheaper for the customer - you don't have to pay the making charge."
Gold plays an important role in Indian culture and gift-giving, particularly during religious festivals and weddings.
"Indians think of gold not only as an investment," says Mr Jain at Motaba & Sons. "It's a passion, a tradition."
But there are divided views on whether that love of gold is actually good for the economy. The nation's central bank has been trying to curb speculation and control imports of the precious metal.
"The Indian government has taken a number of steps this year to reduce gold purchases. The hike in import duty, tightening of norms for gold loan companies and discouraging investment in gold is part of government efforts to curb demand for the metal," says Ms Mehta. "While [the central bank] and government pressure will dent sentiments, a sharp drop in investment demand is unlikely due to the lack of other viable investments."
Sujan Hajra, the chief economist at Anand Rathi, a financial services company based in Mumbai, says: "Some think that gold is an unproductive asset and gold is something which is stopping India from improving the investment because there is a shift from financial assets. Also some people think that gold is one reason why India is having such a big current account deficit."
But Indians place great value on the precious metal in their finances.
"Gold is a very simple asset," Mr Hajra says. "For the poor, if they want to borrow, gold is the easiest collateral for them to borrow."
Meanwhile, the custom of giving gold during weddings in India is more than just a social tradition.
"In India you don't have a formal social security, so if there is some eventuality for the woman and Indian law clearly provides protection so that gold belongs to the woman," Mr Hajra says. "Gold is a social security system also in India. There are clear divides over whether gold is good or bad for India."
business@thenational.ae
The%20specs
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In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
Correspondents
By Tim Murphy
(Grove Press)
The specs
Engine: 2.0-litre 4-cylturbo
Transmission: seven-speed DSG automatic
Power: 242bhp
Torque: 370Nm
Price: Dh136,814
Results:
CSIL 2-star 145cm One Round with Jump-Off
1. Alice Debany Clero (USA) on Amareusa S 38.83 seconds
2. Anikka Sande (NOR) For Cash 2 39.09
3. Georgia Tame (GBR) Cash Up 39.42
4. Nadia Taryam (UAE) Askaria 3 39.63
5. Miriam Schneider (GER) Fidelius G 47.74
Ms Yang's top tips for parents new to the UAE
- Join parent networks
- Look beyond school fees
- Keep an open mind
Abramovich London
A Kensington Palace Gardens house with 15 bedrooms is valued at more than £150 million.
A three-storey penthouse at Chelsea Waterfront bought for £22 million.
Steel company Evraz drops more than 10 per cent in trading after UK officials said it was potentially supplying the Russian military.
Sale of Chelsea Football Club is now impossible.
How to play the stock market recovery in 2021?
If you are looking to build your long-term wealth in 2021 and beyond, the stock market is still the best place to do it as equities powered on despite the pandemic.
Investing in individual stocks is not for everyone and most private investors should stick to mutual funds and ETFs, but there are some thrilling opportunities for those who understand the risks.
Peter Garnry, head of equity strategy at Saxo Bank, says the 20 best-performing US and European stocks have delivered an average return year-to-date of 148 per cent, measured in local currency terms.
Online marketplace Etsy was the best performer with a return of 330.6 per cent, followed by communications software company Sinch (315.4 per cent), online supermarket HelloFresh (232.8 per cent) and fuel cells specialist NEL (191.7 per cent).
Mr Garnry says digital companies benefited from the lockdown, while green energy firms flew as efforts to combat climate change were ramped up, helped in part by the European Union’s green deal.
Electric car company Tesla would be on the list if it had been part of the S&P 500 Index, but it only joined on December 21. “Tesla has become one of the most valuable companies in the world this year as demand for electric vehicles has grown dramatically,” Mr Garnry says.
By contrast, the 20 worst-performing European stocks fell 54 per cent on average, with European banks hit by the economic fallout from the pandemic, while cruise liners and airline stocks suffered due to travel restrictions.
As demand for energy fell, the oil and gas industry had a tough year, too.
Mr Garnry says the biggest story this year was the “absolute crunch” in so-called value stocks, companies that trade at low valuations compared to their earnings and growth potential.
He says they are “heavily tilted towards financials, miners, energy, utilities and industrials, which have all been hit hard by the Covid-19 pandemic”. “The last year saw these cheap stocks become cheaper and expensive stocks have become more expensive.”
This has triggered excited talk about the “great value rotation” but Mr Garnry remains sceptical. “We need to see a breakout of interest rates combined with higher inflation before we join the crowd.”
Always remember that past performance is not a guarantee of future returns. Last year’s winners often turn out to be this year’s losers, and vice-versa.
Jeff Buckley: From Hallelujah To The Last Goodbye
By Dave Lory with Jim Irvin
Company profile
Name: Infinite8
Based: Dubai
Launch year: 2017
Number of employees: 90
Sector: Online gaming industry
Funding: $1.2m from a UAE angel investor
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
