Gold 'biscuits' selling like hotcakes in Mumbai

With jewellers offering gold accumulation schemes Indian consumers are tuning into gold bars as an investment opportunity and prefer to take delivery of physical gold

MUMBAI  - 

They are selling like hotcakes. Gold bars have been moving off the shelves in India's financial capital, Mumbai, more than the trusty, old gold coins or jewellery. Commonly referred to as gold biscuits in the Mumbai market, gold bar buying in main consumer India appears to have resurfaced after a gap of nearly two month. As gold continues to break through the upside, Indian investors are investing in gold bars, for security reasons.

``Customer preferences are changing,'' notes Hareelalbhai Zaveri, a Mumbai-based bullion dealer. ``Earlier, customers would buy gold jewellery since they were considered the best investment option. Nowadays, customers are keen to buy gold biscuits, since they are easy to hoard. The customer is also assured of best value for money. Gold jewellery is no longer an investment option.''

Dealers are also stocking up for a second round of religious festivals starting in August, when demand for bullion picks up. Though jewellery is the most common gift during religious events and weddings in India, gold bars appear to be having a field day, for now.

The rush to buy gold is also ensuring that precious metal prices continue to trade firm on the Asian bourses. Reports indicate that steady physical demand has led to supply tightness, pushing up premiums for gold bars in the bullion trading centres of Singapore and Hong Kong. Dealers maintain that there are good purchases from consumers in China, Thailand and Indonesia.

``We expect some bounce back in the prices of precious metals on the back of some bargain hunting, after a sharp fall in last week's trading session,'' adds Zaveri.
Analysts believe that fresh money has been pumped into gold-based instruments by large institutional investors who have increased their portfolio allocation towards gold, as a means to lower risk in their portfolios.

Premiums for gold bars also seemed to edge up slightly after bullion prices shed their lofty positions. In Singapore, premiums for gold bars edged up to 70 US cents to the spot London prices, with dealers struggling to cope with inquires from consumers in Southeast Asia.

The recent lower gold prices attracted steady purchases from jewellers in Thailand and Indonesia as well as buying from bargain hunters in Hong Kong. ``The physical demand is still very high. My orders go to up to next Friday at premiums of 80 cents,'' a dealer in Singapore told a newswire agency. The dealer has been selling gold bars to top consumers in India.

With Indian investors keen to take possession of their gold holdings, rather than just owning shares in a mining company or a gold-related fund, traders in the futures market insist that many are increasingly opting to take delivery of the metal, rather than simply buying and selling contracts for paper profits.

What appears to be aiding consumer interest in gold biscuit is that several bullion shops are allowing investors to buy coins and gold bars in easy instalments, by engaging them in schemes and ensuring that they participate in programs that allow them to gradually accumulate gold.

Gold accumulation schemes offered by jewellers are an easy investment opportunity and several well-known jewellers are offering schemes that are similar to recurring deposit schemes offered by banks.

The idea is simple - save small amounts for different tenures. At the end of the term, one can buy gold jewellery worth the accumulated amount. Targeted mainly at women buyers, loans for gold are designed to suit the growing middle class segment in the country. As a consequence, a noticeable pick-up in gold bar sales has been registered.

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