India's Gold Buying Season Not Looking As Shiny

October 26, 2018

Mumbai-India (Oct 26)  Festival season in India normally means one thing: a rush to buy gold.

Outside of China, India sees the most amount of gold buying when Indians are, well, happy or enjoying a moment - be it a party, a wedding, or a festival.

But this festive season, starting from around the beginning of October, gold buying has not picked up at the pace once it used to.

Reports are coming in that Indians are not flocking to jewelry stores as they normally would for a couple of reasons - an increase in the price of domestic gold, and the increasing value of the U.S. dollar versus the Indian rupee.

At the first marker of this season, that is Dusshera, when buying the yellow metal is considered auspicious, demand was down between 20% and 40% in some places as compared to the same period last year, according to a Reuters report.

Of course, demand was better compared to some of the previous months, but it has not been as high as it was last year, according to Nitin Khandelwal, chairman of the All Indian Gems & Jewellery Domestic Council, as quoted by Reuters.

Much of the demand for "festival" gold comes from rural India. This year, that sector is lagging, partly because of failure of the monsoon in many parts. A good monsoon means a bumper crop, which translates into better buying of the bullion during the festival time. Even discounts of about U.S. $8 an ounce failed to pull in the crowds.

The next milestone is the Indian festival of lights, Diwali.

While some retail jewelers are optimistic of an increase in pickup, others are keeping their fingers crossed. The price of gold continues to soar, touching Rs 32,350 (about U.S. $442) per 10 grams as of Oct. 23.

Gold plays a major role in the Indian economy. Previous studies have pegged India's gold stock at around 24,000 tons, mostly held by the average Indian. Its value, at today's rates, reaches about U.S. $800 billion.

The last quarter of the year is the season of peak demand, with Indians buying almost 240 metric tons on average in the past four years, according to the World Gold Council.

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