A WGC survey says that there is no dearth of gold demand, but there is lack of trust among prospective gold buyers, not only in India but globally.
Gold remains the third-most popular investment choice, with 46 per cent of all global retail investors choosing gold products - next only to saving accounts (78 per cent) and life insurance (54 per cent) - reveals a new World Gold Council (WGC) survey of retail consumers.
The survey, which has highlighted several positives and a few negatives for the bullion market, shows that 56 per cent of jewellery buyers have bought fine gold jewellery, against 34 per cent who have gone for platinum.
The survey was conducted in the April-September period of 2019.
However, the survey also stresses a lack of trust among prospective gold buyers, not only in India but globally.
“There is some mistrust among those that have never bought gold in the past but are open to the idea of buying in the future, with 48 per cent and 28 per cent of all potential investors and jewellery consumers, respectively, citing lack of trust as a significant barrier.
"That could be mistrust around fake or counterfeit bars and coins, product purity, or the trustworthiness of some retailers.”
Of the 48 per cent who have not invested in gold due to mistrust, 28 per cent say they were worried about fake gold.
As for jewellery, among the 28 per cent who have not bought, 19 per cent have stayed away as they are not sure of the purity being promised and the rest do not trust retail jewellers.
Trust has been a constant issue in India. Though that has not deterred Indians from buying jewellery, the demand remained limited to marriages and other such festivities.
Hallmarking has been promoted aggressively by the Bureau of Indian Standards (BIS).
According to BIS data, 90 per cent of jewellery manufactured in the country are now hallmarked.
So, there is a case for making it mandatory and taking stern actions against those still not selling genuinely hallmarked jewellery.
Of those who have bought gold in the past, 48 per cent are considering doing so again.
Of the ones who have never bought gold, 38 per cent are interested in buying, and 13 per cent want to stay away, according to the survey.
In fact, country-wise results for those who have invested in gold previously show that in India 49 per cent want to buy again; in the US, 48 per cent; and in China 56 per cent.
World Gold Council chief executive officer David Tait says: “The retail gold market is healthy, with gold being considered a mainstream choice.
"But what really excites me is the untapped part of the market - those people who have never bought gold but are warm to the idea of doing so in the future."
However, he suggests: “Two issues need to be addressed for engaging with these potential gold buyers: trust and awareness.
"This market can flourish if we can build trust across the broad spectrum of gold products being sold and raise awareness around the positive role gold can play in protecting people’s wealth.”
Interestingly, 61 per cent of retail investors said that they feel gold is relatively stable across generations and trust it more than currencies.
Among all assets classes globally, 64 per cent prefer gold, 40 per cent investment funds, 40 per cent crypto currencies and 39 per cent shares.
Cryptos, however, are seen good for short-term gains only. India doesn’t allow investing in crypto currencies.
Another interesting aspect telling of how consumers buy gold is, “gold compares poorly to other retail investments and fashion items when looked at through the lens of digital distribution, marketing and communication.
"Global retail investors buy only 9 per cent of gold coins and 6 per cent of jewellery online, compared with 25 per cent gold-backed exchange-traded funds (ETFs).”
In India, however, 80 million people are so far registered as digital gold buyers.
They buy gold online and let it be digitally stored on their behalf.
E-commerce in jewellery is also catching up, albeit at a slow pace.
Photograph: Heinz-Peter Bader/Reuters