Indian Gold Dealers Resort to Selling Gold Leaf

Novel solution to the problem posed by higher gold prices...

THERE IS no need to advocate investment in gold amongst most Indian consumers. The meteoric ascent in Gold Prices, however, is beginning to test many investors, writes MineWeb's Shivom Seth in Mumbai.

Many have shunned Buying Gold in the physical form for the past two weeks. Jewelry shops and traders bemoan the lack of foot falls saying that the high price is testing the affordability of buyers.

To circumvent the dull demand, bullion dealers and jewelers in India have lined up a bevy of half gram gold coins and gold leaf items. Many have also launched innovative schemes and extended their reach to tap the rural markets in order to keep their sales intact.

Riddhi Siddhi Bullion, one of largest bullion traders in Mumbai that provides gold delivery on the spot, futures and forward markets, has launched half gram gold coins. And, according to an official, the half gram Gold Coins in tamperproof packs, introduced recently by the National India Bullion Refinery and Nakoda Bullion, have been witnessing good demand from small investors.

Lalit Jagawat, proprietor of Nakoda Bullion, said customers were showing interest in half gram coins as the price of 10 gram gold is clearly beyond their reach. This, despite the fact that the price of gold has slid 8% from its high of $608.011 for 10 grams quoted last week. This week, the precious metal has slid 3%, but it is still keeping investors away.

"The slide has not brought in any customers,'' said Navinbhai Dholakia, bullion retailer in Mumbai suburbs." Several families are getting ready for the marriage season now. In a place where gifting gold ornaments to brides for their marriage is a common practice, the high price is deterring fresh buying,'' he added.

With gold breaching the $434.36 mark for a sovereign (gold coin) recently, traders estimate the lull in buying could get extended into the next month. Gold is an integral part of marriage, or any traditional custom in India.

Traders have hit on a novel idea – one gram of gold pushed to willing consumers as a long term investment and gold in a tiny leaf form.

"In the last one year, Gold Prices in Mumbai have jumped by 42%. Since salaries have not gone up and there is inflation here, many small time investors and even the lay customer can little afford this price hike,'' said Santosh Mandi, bullion trader. 

"On August 23, in the global market, gold advanced to an all-time high above $1,910 as investors sought to protect their wealth amidst speculation that the global economy is slowing down,'' he said. 

In order to get customers to stick to their plan of Buying Gold even in the smallest of denominations, jewelry houses and traders have hit on an innovative idea to take things ahead. Wholesale bullion traders in Mumbai have launched half a gram gold coins and some have even paraded a gold leaf that weighs as little as 100 milligrams, that is 1/10th of a gram. 

In addition, to give buyers the guarantee of genuineness of the yellow metal, traders are also selling these in tamper proof packages. While half a gram Gold Coins cost just $30.39, a piece of gold leaf of 100 milligrams costs anywhere between $6.51 to $10.03, the latter has a light design. If the investor wants to sell them, the traders buy them back at the prevailing market rate, after deducting the making charges.

Traders said the precious metal is hammered into extremely tiny, wafer thin 100 miligram sheets that resemble a leaf. 

"The idea has been borrowed from fast moving consumer good companies that sell premium soaps or shampoos in small packets in rural areas to meet the rising aspiration of the people living there,'' said Chetan Rathod of Nakoda Bullion. 

"We have realized that many investors would be keen to buy up say 10 or 20 gold leaves and hold on to it for a later stage, when it might be necessary to get some jewelry for the bride or as a gift. At the end of the day, we have to ensure that the customer buys gold from the store and keeps on walking in, despite soaring prices,'' he added.

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