April 17 (Bloomberg) -- Gold buyers in India, the world’s biggest consumer, are flocking to stores to buy jewelry and coins, betting a selloff that plunged bullion to a two-year low may be overdone.
“My daughter is just six months old, but I think it is never too early to buy gold,” said Sharmila Shirodkar, a 28-year-old housewife, while displaying a new pair of earrings she bought from a store in Mumbai’s Zaveri Bazaar. “I had been asking my husband every day if prices will go down more. I couldn’t wait anymore.”
While the drop in gold prompted investors worldwide to pare holdings in exchange-traded products, surging physical demand in India may help stem the 17 percent slide in prices this year. The plunge after rallying for 12 straight years may make bullion more affordable to Indians, according to Mehul Choksi, chief executive officer of Gitanjali Gems Ltd., the nation’s biggest retailer of jewelry and diamonds by sales.
“This is a perfect time to buy as prices will only go up from here,” said Vishal Mehta, a 33-year-old garment dealer, while ordering coins from Choksi V. Naginchand & Co. in Zaveri Bazaar. “I usually buy one gold coin a month, but this time I am buying two.”
Bullion priced in rupees dropped to as low as 25,270 rupees ($466) per 10 grams yesterday, the cheapest since September 2011. Spot gold tumbled 14 percent in two sessions, reaching $1,321.95 an ounce yesterday, the lowest since January 2011 and the biggest drop since 1983. Prices tumbled 5 percent on April 12, taking losses to more than 20 percent since the record close in September 2011, and meeting the common definition of a bear market. The precious metal was 1.3 percent higher at $1,386.15 at 3:25 p.m. in Mumbai today.
“It has been very hectic in the last two days,” said Deepak Tulsiani, owner of Dwarkadas Chandumal Jewellers in Mumbai as he surveyed his 11 employees, who were busy with customers. “There has been a rush to buy gold because now people are getting jewelry 15 percent cheaper than before. It’s value for their money.”
Zaveri Bazaar, the largest bullion market in the country, buzzed with customers, who were browsing through collections of bangles, bracelets, necklaces and rings displayed in trays ahead of the wedding and festival seasons. Most buyers were women in groups of two or more, accompanied by a male who paid the bills.
“Whatever be the price, Indians buy gold because it is an age-old tradition,” C.P. Krishnan, a director at Geojit Comtrade Ltd., said by phone from Kochi. “It has become an unavoidable expense during weddings and festivals. With the sudden crash in prices a lot of buying is happening across India as people are thinking of it as a golden opportunity.”
The selloff in gold was sparked by investor concern that European governments may have to follow Cyprus in selling part of their holdings, according to Goldman Sachs Group Inc. The drop was one of the largest corrections in modern history, according to Deutsche Bank AG.
“Some customers are still scared to buy now as they feel the price will go down more,” Chetan Ranka, owner of Choksi V. Naginchand, said after answering a call from a prospective customer on one of the four phones at his desk. “I received more than 250 calls on Monday inquiring about the prices. Normally I get maybe 50 calls a day.”
Bullion may slump to as low as 24,000 rupees per 10 grams in the “short-to-medium term,” according to Religare Commodities Ltd. Futures on the Multi Commodity Exchange of India Ltd. have fallen 17 percent this year after rallying for eight straight years.
India has tripled import taxes from as low as 2 percent in January last year after the current-account shortfall, the broadest measure of trade, widened and the rupee slumped to a record against the U.S. dollar. Overseas purchases dropped 11 percent last year to 860 tons from a record 969 tons in 2011, the World Gold Council estimates. Demand for jewelry and investment fell to 864.2 tons in 2012, the second straight year of decline, it said.
Gold is bought in India during festivals and marriages as part of the bridal trousseau or gifted in the form of jewelry by relatives. The festival season in India runs from August to October followed by the wedding season from November to December and from late March through early May.
“I had been keeping a tab on gold prices daily by reading the newspapers,” Sakshi Jain, a 39-year-old housewife, said as she held an intricately designed necklace against her neck in front of a mirror in Zaveri Bazaar. “I had some wedding purchases to make and as soon as prices dropped I came to buy.”
To contact the reporter on this story: Swansy Afonso in Mumbai at email@example.com
To contact the editor responsible for this story: James Poole at firstname.lastname@example.org