For seven-year-old Sai Jayarama from Kingston, South-West London, like many from 2nd and 3rd generation Indian families living in the UK, gold has always been part of his family and spiritual heritage.
In the last year Sai’s parents have been watching the price of gold increasing. They would like to know why the increase and should they buy gold now.
The Jayarama’s are right to say that gold prices have been going up, writes senior gold bullion dealer, Oliver Temple.
From January to March, gold prices rose by 20%. This was the best quarterly performance since the start of the economic downturn in the last quarter of 2008.
If we look at India itself first, gold imports have slightly dropped by around 16% from a year ago to 926 tonnes.
I think the main reason for this has been because of recent strike action from the national jewellers’ associations.
The Indian government refused to back down on a 1% gold jewellery sales tax. Jewellers say the strike has cut into their profits.
India still, however, remains the 2nd largest importer of gold in the world after China. The metal has important significance for many families with an Indian heritage and I can’t see this interest decreasing for the time being.
We also always see demand increasing around key festival times. In fact during Akshaya Tritiya Festival in 2015 because of an unnaturally heavy rainy season, many in India’s rural communities were not able to leave their communities to purchase gold. Sales were as a result lower that year.
The International Monetary Fund (IMF) have maintained India’s 2016 growth forecast at 7.5 percent but have cut growth estimates for the global economy including China.
It said India is in a bright spot and will be the fastest growing major economy. That could mean more purchasing of gold which would push prices up.
The global economy and indeed the UK’s own economic forecast are the areas to watch. China’s recent falling stocks and slowing growth will be having an impact on investor confidence. There has been the Greece bailout situation, uncertainty surrounding the US interest rate rise and now the Brexit.
The IMF has warned that the UK’s exit from the European Union could cause “severe regional and global damage”. It said the so-called “Brexit” would disrupt established trading relationships and cause “major challenges” for both the UK and the rest of Europe.
All this factors will be having a bearing on gold. When there is economic uncertainty, gold becomes more attractive as a safe haven. According to the World Gold Council, Central banks have been bolstering their gold reserves.
Charles Morris, who edits the industry newsletter Atlas Pulse, believes like us that most demand is being driven by private investors and institutions. Mr Morris says this could be responsible for around 80% of the gold price move.
India’s continued appetite for gold, shows that the precious metal has certainly not lost its shine for Indian families living both here and in India itself. With the yellow metal’s prices looking like they will continue to climb, now could be a good time to buy gold.
Purchasing gold is up to the individual investor. I would, however, suggest those interested in doing so talk to a reputable gold bullion dealer such as Gold Investments which has specialised in serving the Indian community in the UK for over 30 years.
To chat through your gold investment options with a tea or coffee, please get in touch with me or the team: 020 7283 7752 or [email protected]
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Image from Arvind Balaraman at freedigitalimages.net. Case study for illustration purposes only.