Akshaya Tritiya 2020

Akshaya Tritiya will be celebrated across the country on Sunday, 26th April, 2020. But this year celebrations will be locked indoors given the pandemic situation. Akshaya Tritiya is considered to be a very auspicious day to buy gold and silver.

Economically this day is quite productive for marketers as they cash in on the festivity to boost their sales. Marketers indulge in high voltage advertisement campaigns especially the jewellery stores. In fact people in India and overseas book jewellery in advance and take delivery on Akshaya Tritiya day. It’s a day of frenzy buying for all precious metals especially gold. Sales on Akshaya Tritiya day usually increases four to five times compared to normal days, said a top gold dealer in India.

After Dhanteras, Akshaya Tritiya has been considered a festival where gold is bought in huge numbers. But this year, as the country witnesses a national lockdown, sales will be damp, remarked one of the bullion dealers in India.

He further explains that Akshaya Tritiya, which falls this year on April 26, is a lost opportunity for jewellers due to the nationwide lockdown. Jewellery sales have come to a standstill, he added. Factories are closed resulting in a massive loss for jewellery manufacturers and retailers. There were many weddings that were lined up in the month of May. But due to cancellations of public gatherings like weddings, jewellers won’t be able to cash in on the festive season.

It is almost a month since the lockdown was first announced and jewellery shops remain shut. Many fear they will not be able to capitalise on the huge opportunity to boost their revenues in a month traditionally known for the highest demand for ornaments.

Jewellers are concerned about the increasing financial stress this would cause them as they haven't done business since March. To make matters worse gold prices were ruling high at a time most Indians consider inauspicious for buying gold. All were well stocked to meet demand after this inauspicious period ended, when a large part of the off-take is usually attributed to the spike in marriages and the auspicious period of Akshaya Tritiya. However, with the current liquidity crisis, jewellers fear that whenever they are allowed to raise their shutters, customers will rush to sell their gold holdings in order to generate cash, commented Mr Prithviraj Kothari, Managing Director of RiddhiSiddhi Bullions Limited.

There are jewellers who are accepting bookings, but all deliveries are expected to be processed after the lockdown.

With offices shut and lack of liquidity in markets, sales figures will not even be close to impressive. World over the pandemic has affected all possible markets and precious metals have also not been spared.

We saw gold performing extremely well as the year started. In fact, jewellers in India were expecting to have good sales figures in the current years Akshaya Tritiya. But no one had ever predicted this drastic dip in global growth.

The precious metals markets, especially jewellers, will suffer a huge setback and it will take a long time for things to get back on track, concluded the ‘Bullion King Of India’.

But for the ones who are really keen to buy gold on Sunday, they need not worry as the option of buying gold online(in the form of ETF)  is always open, said an executive at RSBL. Sadly, physical gold shops will be shut and online would be the only choice available for gold buyers.

Stay With Gold

Since 20th March gold prices have rallied in a spectacular manner. They have not only made up for the price weakness earlier in March, but even set a new high on 14 April (still far below the all-time of USD 1,921 on 6 September 2011). Spot gold has surged more than 10% this year, reaching an around 7-1/2 year high of $1,746.50 on April 14, as the coronavirus pandemic roiled global markets and central banks unleashed a wave of monetary stimulus’s.

In the wake of the rapid spread of the new coronavirus throughout the world, gold gained significant ground due to panic. Bullion dealers in India and around the global markets believed that gold might cross $2000 per ounce given that the situation is getting worse worldwide.

However, on the other hand, we see economies pumping in stimulus and planning to reopen soon after the lockdown. This is boosting confidence in investors of a faster economic recovery world over, commented a top gold dealer in India on the condition of anonymity.

There were constant warnings regarding potential for a major hit to the U.S. and global economies since February 1st when U.S. virus cases were in single figures and President Trump pontificated that it would rapidly fade away completely in America.  However, by the start of this weekend, the U.S. has recorded over 700,000 virus cases, rising at around 30,000 daily and more than 37,000 deaths.  This works out at 3.7 times the number of cases which have occurred in Spain, the second most affected country according to official statistics (although true Chinese figures remain suspect) and nearly twice the number of deaths.

However the U.S. population is far higher than that of any European nation and in terms of cases and deaths per million people, the U.S. is still well below similar figures for the most affected European countries, but the overall figure is still rising rapidly, while those in most of Europe appear to be diminishing.   At the current rate of infections and deaths, the U.S. could reach 1 million known virus cases and 50,000 deaths by the end of the current month.

Despite the alarming figures, Friday saw a big uptick in global equities and the gold price dropped back below $1,700 for the first time in the week.  Global equities picked up quite strongly on Friday and, as they did so, safe-haven assets like gold and silver fell back – equally sharply.  This was prompted, no doubt, by President Trump’s statement on getting America back to work in some less-affected states and reports that the drug, Remdesivir, was showing good results in controlling the virus in already-affected patients.

However, it is up to the state governors to order reductions of the lockdown restrictions and relaxations. Some less affected states, however, with mostly agricultural communities, may see some return to work fairly quickly, but overall the economy will remain in the grip of the virus for some months to come. Recovery will definitely be gradual and slow.

Currently, Gold has been moving to and fro, following a series of events that have been constantly influencing its prices.

Supply constraints- when gold prices were close to the previous low around USD 1,450 per ounce, there were signs of a shortage in the physical gold market. The temporary closing of three gold refineries in Switzerland was a major reason for these constraints. As a result, it was more difficult for investors to get their hand on physical gold.

Support level- the level of USD 1,450 per ounce has been an important support in the past. As gold prices failed to move below this level after several attempts, investors became convinced that this was a good buying opportunity.

Monetary Policy- the Fed used its full array to fight the shortage in the dollar market and to support the economy. The Fed announced unlimited asset purchases to replace the previous $700bn commitment. This has driven the balance sheet much higher. Other central banks have also eased monetary policy substantially. Aggressive monetary policy easing sounds like music to the ears of gold investors, especially as official rates and government bond yields are unlikely to rise substantially in the coming years and real yields to stay low or move even lower.

Financial stimulus- Investors have become optimistic regarding the current pandemic. There is optimism amongst investors that the world has already seen the worst scenarios in the COVID 19 crisis and that the current recession will be short-lived. Many banks announced monetary and fiscal stimulus across the globe, combined with some improvement in the number of Covid-19 casualties in countries that have been in lockdown have resulted in some optimism among investors. Gold prices have weathered well in a risk-on environment, so they have rallied in tandem with US stocks (see graph on the left below). As risk-off sentiment eased, the dollar has declined, and this has also been a support to gold prices.

Overall, therefore, the near term outlook for general economic growth looks to be dreadful, but (for gold) the outlook for more debt, more liquidity, and potentially an increase in the likelihood of inflationary pressures growing, looks positive for the price – at least in dollar terms.  We also see the longer-term negative economic outlook as keeping the equities extremely vulnerable for the foreseeable future.

We at RiddhiSiddhi Bullions Limited also think that a lot of investors will re-evaluate the gold positions they have or the positions they would like to have. One of the subject experts at RSBL recommends staying with gold as a primary wealth protection investment.  Improvement in investor sentiment, aggressive monetary policy easing, ultra-low interest rates and fiscal stimulus has all supported gold prices.