India's Akshaya Tritiya festival saw strong Gold Investment demand, but weak jewelry sales...

GOLD DEMAND from traditionally hungry jewelry buyers fell sharply during India's Akshaya Tritiya this May, reports Commodity Online in Mumbai.

But Gold Investment demand – expressed through the "dematerialized" Gold ETFs traded in a special Sunday session on India's stock markets – rose 5 times over from recent daily averages.

Among the most sacred festivals celebrated in India, Akshaya Tritiya is considered one of the four most auspicious days in the Hindu calendar, as www.daijiworld.com notes. Observed on the third day of Shukla Paksha in Vaishakha month, the term 'Akshay' is derived from the Sanskrit for "never diminishing". By doing a good deed on Akshaya Tritiya one can earn punya (merit) for life. Knowledge gained or charity done on the day is sure to be to be fruitful. The sun and the moon are said to be most radiant and best placed on the day.

Therefore it is one of the most popular dates in Hindu calendar for marriages, for beginning new ventures, for investing, and for purchasing valuables like gold and diamonds.

"It is not just a day associated with Gold Investment, but one can engage in charity works and the like which will provide lot of satisfaction", says advocate Anupama Hegde.  But the festival has an increasingly strong association with Buying Gold, however. Because it is believed that buying and wearing new gold jewelry on Akshaya Tritiya brings prosperity and success to an individual and their family.

Across India – still the world's No.1 destination for privately-bought gold – gold retailers ran special gold jewelry festivals, launching new designs and collections. Most of the buyers stayed home, however, instead of visiting jewelry shops on Akshayas Tritiya, that auspicious day for Indians to Buy Gold.

Most of Mumbai's jewelry showrooms looked deserted on Akshaya Tritiya (May 16th) even though the price of gold eased from a record high 18,508 Rupees per 10 grams on Friday to Rs 18,397 per 10 gm on Sunday.

However, gold exchange traded funds (Gold ETFs) witnessed impressive volumes in special trading on Sunday on the country's premier stock exchanges.

Both the Bombay Stock Exchange and National Stock Exchange opened the market on Sunday's Akshaya Tritiya, trading from 9am to 3.30pm exclusively for Gold ETF dealing.

Gold Trading on the BSE was impressive. Kotak Gold, an exchange traded fund, saw trading volume zoom to 9,229 units against the two-week average of 1,779. Benchmark BeES topped the list with 80,000 units changing hands against its two-week average of 15,000.

While UTI Goldshare, SBI GETS and Kotak Gold closed the day on a positive note on the NSE, Gold BeES, RelGold, Religare Gold ETF and QGoldHalf finished lower; QGoldHalf tumbled by over 5% on the NSE. Only Reliance Gold fell on the BSE.

Banks also witnessed brisk Physical Gold sales on the occasion of Akshaya Tritiya on Sunday. Major public and private sector banks, including SBI, HDFC Bank, ICICI Bank, Bank of India, Union Bank of India and Corporation Bank, had kept select branches open to cater to the gold demand from customers. Some of the banks also offered discounts.

HDFC Bank says it sold around 200 kg of gold on Sunday. Bank of India kept around 300 branches open for gold sales across the country. The bank offered a discount of Rs 10 a gram.

Gold bought as an explicit investment is a relatively new asset class in India, where headline inflation soared to a 17-month high of 9.9% in March. Last year India's demand for gold jewelry was 405.8 tonnes, while that for investment was at 74.2 tonnes, data from the World Gold Council shows.

Overall, it seems demand for gold at Akshaya Tritiya across the country was around 20-25 tonnes down on last year's 45-tonne sales, because of the high and volatile prices. Traders say many Indians are responding by buying smaller quantities to maintain the same expenditure, or recycling old jewelry. Those who can afford to spend more may wait for prices to stabilize before they Buy Gold.

After Akshaya Tritiya, demand may surge again for the festivals of Ganesh Chaturthi in September and Dhanteras in November. But if gold demand falls in India, that could have a major impact on global demand, as India is the biggest buyer of gold.

Since the country imports most of the gold it consumes (it has little-to-no domestic Gold Mining output), overseas price movements – along with the exchange rate – influence prices here.

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