Gold sales jump about 20% for Diwali

Mumbai-India (Oct 24)  Gold sales in India during the festivals of Diwali and Dhanteras rose by about a fifth, a senior official at the country's biggest gold trade group said on Friday.

Premiums in India, the second biggest buyer of bullion, jumped to $17-$18 an ounce this week, compared with $12 last week, on surging demand.

Dhanteras, associated with Lakshmi - the goddess of wealth, and Diwali, the festival of lights, are both considered auspicious to buy gold.

"Diwali sales across the country were very good. It was about 20% higher compared with last year," Bachhraj Bamalwa, director at the All India Gems and Jewellery Trade Federation, told Reuters. The trade body represents more than 300,000 jewellers.

The strong demand from India could support global gold prices.

India set a record high import duty on gold last year to curb its trade deficit, and made it necessary for importers to re-export a fifth of all their purchases.

The moves contained imports into the country, with the resulting supply shortage sending local premiums to about $160 an ounce over the global benchmark at one point.

Some of the rules were eased earlier this year, leading to higher imports and a fall in local prices.

"This year prices were low, sentiment was good and we have a stable government at the centre; all of these helped boost sales," Bamalwa said, referring to this year's election of Narendra Modi as the prime minister.

Though the major gold buying festivals of the year are over, Bamalwa said sales could continue to be strong due to the wedding season that will extend until early next year.

In anticipation of strong demand during the festivals, India had imported $3.75 billion worth of gold in September - a 450% jump from the same period last year.

The jump in imports weighed on the country's trade deficit again, sparking fears that the government could tighten the screws again on overseas purchases of gold.

Finance Minister Arun Jaitley was quoted in local media as saying that he could look at curbs on gold imports after the festive season.

Any further curbs could hurt imports and push up premiums, Bamalwa said.

In other parts of Asia, buying interest for gold was quiet, with premiums slipping in some regions, dealers said.

"I think prices have to fall toward or below $1,200 before people come into the physical markets again," said a trader in Hong Kong, where premiums slipped to $1.10-$1.20 an ounce from about $1.50 last week.

In China, premiums fell to about $1.50 an ounce on Friday from $2-$3 an ounce.

Source: Mumbai