Gold exchange traded funds could begin to shine as India heads into a traditionally strong buying season for bullion.
Physically backed gold ETFs, including the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL), jumped 1.3% Friday. The ETFs have gained about 6.6% year-to-date.
COMEX gold futures were up 1.3% Friday, trading around $1,300 per ounce.
Indian consumers could be increasing gold purchases due to the weaker prices, potential government changes, the Hindu festival of Akshaya Tritiya and the upcoming season traditionally reserved for weddings, the Wall Street Journal reports.
Indian consumers are warming up to gold as elections could put the Bharatiya Janata Party, a more business-friendly party, in power. [India ETFs Surge as BSE Hits Record]
“We are expecting the new government to ease some of the policy restrictions. If the changes are made, then demand will certainly pick up,” Vasu Acharya, director of Parker Bullions, said in the article.
Earlier this year, India raised its import tax on gold in an effort to pare its current account deficit. Gold is India’s second-largest import after oil.
Moreover, the traditional festival and wedding season is considered a good time to purchase gold.
“Demand is growing as more people are coming to purchase gold during this auspicious period,” Ashish Pethe, partner at Waman Hari Pethe Jeweller, said in the article. “Normally, jewelry sales account for 90%, and coins and bars the rest. However, today we expect the share of coins and bars to increase to as much as 20%.”
Friday, May 2 marked the start of Akshaya Tritiya, a holy day for Hindus. It is considered a very lucky day to start new businesses or investments on this day, which prompted many to buy gold or property.
India is the world’s second largest consumer of gold, with the World Gold Council projecting the country to acquire 900 to 1,000 metric tons this year.
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Max Chen contributed to this article. Tom Lydon’s clients own shares of GLD.