Future of Gold Business in Kerala

Shoppers in a gold store in Kerala

Pic source: Flickr
Do you know the most crowded shop in Kerala after govt run liquor shops? If you think it’s ration shops, then you’re wide off the mark. It’s gold shops in Kerala which is perpetually packed with buyers eager to buy gold. I guess, we Keralities has picked the fascination towards gold in the 80’s or many be in late 70’s. Whatever, I may be wrong, it’s just my guess.

However, one of the question I was thinking is this – how long will the lust or the bull run on gold purchase last in Kerala? Will Malayalees continue to consume tons of this metal for the sake of giving dowry or as investment?

I doubt the growth and I see a gloomy picture. And, here’s why.

There are few aspects to why gold biz will grow lean in the coming years.

# 1. People are broke. Well, I’m kind of broke and I don’t see much prosperity in people. When I travel by bus, the general appearance doesn’t show a prosperous picture. Well, I could be wrong. Reason for saying is just this; Gulf economy is in a rocky state. There are reports of companies sending employees out and employees are working with less salary. This could directly and indirectly affect the earnings of our state. With not much money, who has the capability to buy gold as in the earlier era.

#2. With rising number of love marriages, the role of parents are taking a back seat. These days, boys and girls are planning, deciding and making arrangement for their marriage. In such cases, the hefty dowry are often less important that it used to be.

#3  Rise and fall of gold prices has shaken the confidence of people. The investment in gold has come down and now people are diversifying the investment into multiple assets, like land, shares, gold, mutual funds, etc.

# 4 Rise of gold pledge is the testament of the rise in residential borrowing. So, what’s happening in Kerala. People have pledged most of the gold they own. So, there’s little gold left in the hands people. Who own the rest? The big financial firms, like Muthoot, Cooperative banks,  Nationalized Banks, etc.

Taking stock of this scenario, there’s little hope for gold rush to continue in Kerala. One point I missed here is that the taste of people has changed and now many prefer platinum and diamonds. So, another negative vote for gold.

So, what’s the conclusion…

If you’re in gold business, it’s time to diversify into other business areas. For instance, we have seen how: Muthoot group has diversified into tourism, hospitality, etc. Well, I think they know the old parable “Don’t put all eggs in one basket”.

Bye!

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2020 update: I was wrong to say back then that our gold fascination will die soon. As I write the price of one gram of gold has shot up beyond 3K. And, still there’s no less demand for gold in Kerala.

Damn! I’m no good in predicting the buying trends or behavior.