The impact of COVID19 on gold industry has already made the market very uncertain. Most of the investors are left in doubt as they see an unfixed movement in the gold industry. In today’s time, everyone is suffering from the invincible and epidemic COVID-19 virus. We all know that the first report of this virus emerged in Wuhan, a city in eastern China. But now, COVID-19 is that deceitful virus which is increasing at a very high momentum across the world. The world as a whole is fighting against the epidemic COVID19, and day by day, many economic sectors are being affected by the impact of coronavirus.
COVID19 has not only become a reason for infections and deaths, but it has also inflicted chaos on the global economy on a large scale. As a result, it is destroying many livelihoods, businesses, industries, employment, and the entire economy. We can see the impact of COVID19 on the IT sector, the automobile sector, the gold industry, and many more sectors. The saddest part is that the impact result is not so good. Many companies have also started postponing their IPOs as a result of the impacted economy from COVID19 India. We can analyze the impact of Covid19 on one of the most demanded sectors, i.e., the gold industry. Let’ understand how Covid-19 has impacted the Gold industry and is remodeling the Indian economy by forcing the investors to think twice before investing.
Financial Expert Vedant Goel Founder of www.ipocorner.in says, “The gold Jewellery industry is facing a sturdy challenge by several elements such as low rate of consumer demand, and unstable rise of the gold price, slowing economic growth faltering rural output and vigilance lending source due to the impact of COVID19 on the gold industry.”
To know more about the COVID impact on the gold industry, we talked to an expert- Mr. Mahendra Luniya.
Mr. Mahendra Luniya is the Chairman of Vighnaharta Gold Ltd., a Pune based gold investment and booking company. The company works with an innovative concept of 24carat gold booking and gold deposit options on the Pan India level. Here are his views about the impact of COVID19 India is facing on large scale sectors.
Q1. What are your views on the Impact of COVID19 on the Gold Industry in India?
Mr. Luniya: The massive effects of the COVID19 world have created clamor in the stocks and retail markets of every nation, including India. In India, purchasing of gold metals or gold Jewellery is a most demanding tradition throughout the year. It’s on the peak on almost all significant occasions such as weddings and festive seasons, especially, Akshaya Tritiya. Buying gold is believed as auspicious in Indian tradition. But the appearance of COVID19 has hugely affected the Gold industry, and buying activity has decreased. People have transferred their buying activity of gold from physical gold to e-gold, but still, there is a lot of decrease in the gold sales, if compared to the previous years. And in the upcoming years, like two to three years, people will have more tendencies to sell their gold rather than to invest in it. The reason is simple, i.e., due to COVID19, they will suffer more from a financial crisis. In that case, they would like to sell their gold in stocks, to survive their living near future.
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Q2. How do you see the Future of Gold Industry in India, especially after COVID’s impact on Gold Industry?
As mentioned above, Indians consider buying gold as an auspicious activity. India is that hub where gold is a determined and an essential asset. Therefore, no doubt that this mentality will be much affected after COVID19. But, we can now see that people are also attracted to digital gold. The Government of India has also started focusing on various investment schemes on digital gold. From an investor’s perspective, digital gold is much more beneficial than physical gold. So, as an impact of COVID19 on the gold industry, we can see digital gold or e-gold as the future of the gold industry in India.
If we talk about the future prices or value of the gold industry in India, then we should not forget that the whole world is going through uncertainty. And this is also a fact that the demand for gold will always be on the peak. Keeping all these factors in mind and the present value of gold on the international market, we can see that the price and value are increasing more after the COVID19 world impact. Within the next 1-2 years, the global price of gold can touch $3000, which will be equivalent to Rs.75000 to Rs.82000 in the Indian market.
Q3. Will it be possible for the gold jewelry retailers to sustain in the uncertain market caused due to COVID19?
It could be a little hard for almost 30% to 40% of gold Jewelers to survive in the uncertain market. Rest retailers who are also involved in the trading of gold can sustain for the long term. Those gold jewelry retailers who were working on investment schemes from their customers can face some problem in continuing their business in profits. The consumer’s physical gold buying behaviors have also changed as we can see a downfall in the sales from the last six months. This downfall can even continue for the next 6 to 12 months. For example, a shocking but reality has also been watched for one of the largest gold jewelry retailers in India, i.e., ‘Titan’s Jewellery.’ The company was progressing running well till 15 March 2020, but the COVID19 outbreak has hit its business. Approx., all 280 branches across India are currently shutdown. Similar to this, there are lots of other traders and retailers who are facing a negative time due to the impact of COVID19 on the gold industry.
Q4. Can we observe the downfall of the gold industry as a part of the recession after COVID19 resulting in more job cuts and a weak economy of India?
Most of the gold players in the nation have already started the procedure of job cuts. Those employees who were working in offices or retail shops on a contract basis are losing their jobs. Keeping the present pandemic situation in mind, it can be said that there will be more job cuts in the gold industry of India. Jewelry retailers will observe sharp temperance in footfalls over the upcoming few months, at least. Not only the overall revenue will be impacted, but the retailers will also face fixed costs burden in the form of employee salary, rentals, and expenses. This will affect the earning profile of retailers.
Apart from this, if we talk about recession and a weak economy, then the truth is, yes, a recession is going to happen, and not only for the gold industry but almost 80% of the sector in India. And actually, the recession has already started because from the last three months, due to the COVID19 India lockdown, no shops or offices are operational. These unexpected COVID19 circumstances would change every sector of India. There is no doubt that 2020 is going to be a different year compared to any previous years.
Q5. How was the performance of the Gold Industry at the time of Akshaya Tritiya this year as compared to previous years?
The COVID19 India lockdown has dampened public mood, savings, and their sentiments. To watch out for the impact of COVID19 on the gold industry, many gold retailers and businesses advertised for e-gold buying just before the auspicious period of Akshaya Tritiya this year. The result was quite surprising. After this survey, most of the gold retailers received 50% more bookings for digital gold, compared to previous years. This rate increased drastically because no one can visit a store and buy physical gold. This also predicts that the gold buying psychology in the people has not been affected much negatively by the COVID impact on gold industry. People still consider gold as a valuable asset to buy, but we can see the reverse within the next 2-3 years when the effect of recession will be on the peak.
The impact of COVID19 on gold industry has started changing the Indian economy and will have a much more drastic effect in the coming time, sponsored by IPO Corner.
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Stay tuned with us to know more about the COVID19 impact on other industries as we are coming up with a series(sponsored by IPO Corner) of efforts to make an expert analysis and report on the impact of COVID19 on various industries of the nation.