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L.N. Revathy

Coimbatore, Aug. 26 On at least one parameter of retail consumption — gold — there is no sign of a slowdown! On the contrary, there is a sign of a pick up in demand. Bankers selling gold coins confirm that there has been a rush over the last one month. Onset of the festival season coupled with the downward slide in gold rates appears to have triggered a fresh round of enquiries.

The main branch of the State Bank of India in Coimbatore, which is among the 14 branches authorised to import gold from its overseas branch in Mumbai (for subsequent sale to bullion dealers and traders), is witnessing a dearth in supply of the yellow metal.

Its Assistant General Manager, Dr A.A. Rajasekar, contended that the situation was the same all over the country. He told Business Line that the supply was almost dry and the branch had no stock of the yellow metal.

A look at the bullion sales figure revealed that the branch had sold 600 kg between April and June 2008 against 400 kg during the corresponding period of the previous year and an equal volume in July 2008 till date. “There is huge demand. We are waiting for the consignment,” he said.

The situation at Union Bank of India, Coimbatore, is no different. Its AGM, Mr S. Padmanabhan, said bullion sales between April and August 2008 were 1,094 kg compared to 643 kg during the same period last year.

While the sale of gold coins has not been brisk at SBI, UBI appears to have been aggressive on that count. Against 225 coins (of different denominations) sold during the first five months of the last fiscal, the coin sale totalled 760 till August (SBI has registered a sale of 400 coins up till August — in 2007-08 and 2008-09).

UBI sources perceive the demand for the bullion to increase till the Onam season.

“The demand for gold coins has slackened as the retail buyer has realised that he can get it at a cheaper rate outside,” a UBI official said.

Business appears to have become brisk this time. Investors in gold, jewellers said, rushed to take advantage of the steep decline in rates. From a level of $930.1 an ounce on July 28, it nose-dived to $784.75/ounce on August 15 and crossed the $800-mark on August 21. “It is hovering around $830/ounce today,” Dr Rajasekar said.

Renowned jewellery houses have also reported the mad rush for buying gold ornaments.

“This unusual rush and the delay/long wait at the cash counter are because more people have started to swipe their credit cards to buy ornaments,” Mr Rajnikanth of Kirtilal Kalidas said.

And it is not purchase of ornaments alone. Customers have also started buying gold coins from jewellery shops. While banks and select jewellery houses offer 24 carat gold coins, dealers in gold ornaments generally sell the 22 ct coin weighing one, two, four and eight grams each.

“Customers buy the one and two-gram coins to give away as gifts. Such purchases are close to the festival season such as Diwali. Because of the steep decline in the price, the demand has surged,” the jeweller said.

And banks, according to an investor, have capitalised on the situation and been equally aggressive in marketing gold coins. But it has not been a case of buyers making a beeline only for bank counters. There is no doubt that buyers trust banks for purity of gold they buy. But they fail to compare the rates quoted by the different banks, and seem unaware of the bank commission and sales tax collected thereon. Often, the more savvy customers turn to a jewellers shop because of this. The difference in prices can be as much as 10 per cent to 12 per cent.

“What is the use of taking coins from a bank?” asks Mr Senthamarai of Palakkad, an unhappy customer who found to his dismay that he had paid Rs 135 more for every gram of coin purchased from the bank. While the bank quoted the per-gram rate at Rs 1,155, it excluded bank commission of Rs 90/gm and tax at 4.04 per cent, which amounted to Rs 50/gm. The total cost therefore amounted to Rs 1,295/gm.

Mr Senthamarai took the coin the very same day to a jeweller and found that he was offered Rs 1,160/gm (24 ct) for the coin. “The jeweller refused to entertain the commission and tax. I found that I had lost Rs 135 on every gram purchased,” he said, unhappy with the investment.

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