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High Gold Prices Overshadow Festive Cheer; Demand Expected to Dip This Dhanteras
Dhanteras Demand Wanes as Gold and Silver Prices Soar to Historic Highs
Jewellers and retailers in India are bracing for subdued demand and declining sales volumes this Dhanteras, despite a reduction in customs duty, as gold prices have soared to record levels ahead of the Diwali season.
Soaring Gold Prices Ahead of Dhanteras
Traditionally, the festive period, combined with the wedding season, sparks a surge in gold buying. However, with gold prices now hovering around Rs 80,000 per 10 grams and silver surpassing Rs 1,00,000 per kilogram in Delhi, the outlook for sales has dimmed.
Gold Prices Hit Record Highs
After six consecutive sessions of price increases, gold and silver hit fresh record highs in the capital on Wednesday, largely fueled by the ongoing festive and wedding demand, according to the All India Sarafa Association. Gold surged by Rs 500 to reach an all-time high of Rs 81,500 per 10 grams, while silver jumped Rs 1,000 to Rs 1.02 lakh per kilogram.
Gold prices of 99.9 per cent and 99.5 per cent purity rose by Rs 500 each to Rs 81,500 per 10 grams and Rs 81,100 per 10 grams, respectively.
Silver jumped Rs 1,000 to reach a fresh high of Rs 1.02 lakh per kg.
Impact on Sales Volumes and Value
Senco Gold and Diamonds Managing Director and Chief Executive Officer Suvankar Sen said in terms of sales, the volumes will take a hit following the rising price.
“So, in terms of quantity to be sold, compared to last Dhanteras, minimum 10-12 per cent degrowth in volumes will happen, but because the prices have gone up so much. Maybe we will end up having about 12-15 per cent growth in terms of value,” he added.
This time with the global uncertainties, the gold price has grown up a little too fast in a short period. prices are at all-time highs both domestically and internationally.
Despite a duty cut that came as a relief for the largest consumer, prices are back above all-time highs denting some appetite for the consumers. However, as has been the case for decades, investors tend to get used to higher prices over time and demand catches up again, Commtrendz Research Co-founder and CEO Gnanasekar Thiagarajan told news agency PTI.
Meanwhile, P N Gadgil Managing Director Saurabh Gadgil said, in volume terms, the industry is likely to ‘just meet last year’s numbers’.
Global Factors Driving Price Surge
“Because of the Israel and the Middle East issue, gold prices have propped up as it looked as a safe-haven. During Dussehra what we saw was there’s been a growth in value because gold has gone up. Business has gone up by 15-20 per cent and in volume terms we have been able to just meet last year’s numbers,” he added.
Mixed Outlook for Industry Players
Despite all-time high price levels, some jewellers and retailers believe though consumer demand could take a hit, central bank and investment demand could more than compensate for that.
Optimism in Wedding and Investment Demand
“Even as the prices are moving up we are expecting good business and the sales are likely to be similar to last year as there are over 40 lakh weddings taking place after Dhanteras. We are expecting sales volume to be around 20-22 tonnes on Dhanteras day, which is similar to last years’,” All India Gem and Jewellery Domestic Council (GJC) Chairman Saiyam Mehra said.
After the Budget, he said, when the government reduced the duty to 6 per cent from 15 per cent, the business picked up, however, with rising prices currently it is 10 per cent less compared to last year.
“However, we expect the sales to pick up during the Diwali festivities. Besides, we are also expecting the casual investment section to do well with consumers buying lightweight items like bracelets, earrings, rings among others,” he added.
Jewellery retailer Kalyan Jewellers’ Managing Director T S Kalyanaraman said, “Looking at the strong footfalls during the second quarter we are optimistic about sales during the festivals. Pre-book orders for the festivals are also looking good. It is usually seen that when there is a sudden hike in price, consumers take a pause. Nowadays consumers buy with a budget, so we don’t talk about volume anymore,” he added.
World Gold Council Regional CEO, India, Sachin Jain said that despite gold prices touching record highs, anecdotal feedback from the industry indicates a resurgence in gold buying due to various ongoing festivals, with demand largely driven by investment sentiment and wedding-related purchases.
Rural Demand and Festive Season Boost
“There is also an expectation of increased demand from rural areas, driven by improvements in robust economy and consumption. Good monsoon and higher crop sowing this year are anticipated to boost rural incomes further, potentially leading to higher gold purchases. Overall, we are expecting gold demand to continue this Diwali and till the end of the year due to the wedding season,” Jain added.
Gold Price Trend In India Today
Dr. Renisha Chainani, Head Research – Augmont – Gold For All, said, “In the face of overbought conditions on the daily chart, a rise in US Treasury bond yields and a stronger US dollar caused profit-making around the precious metals pack. Former President Donald Trump and Vice President Kamala Harris are in neck-to-neck competition in opinion polls, and the increased likelihood of a Trump victory is seen as a threat to a stable geopolitical outlook.”
“Bullion prices would be supported on dips as war wages in the Middle East. Despite efforts at a ceasefire, fighting between the Israeli army, Hamas, and Hezbollah in Gaza and Lebanon, and the Israeli military continues to fight,” Chainani said.
Chainani added that gold continues to rise steadily across all time frames (short, medium, and long), and it is currently headed towards its next goal, which is $2800 (~Rs 80000), after breaking over the $2750 barrier.
“As suggested earlier, silver prices could see some profit booking at higher levels, exactly what happened yesterday. Prices need to sustain above $34.5(~Rs 98500) to continue the uptrend or if it falls below $33.60 (~Rs 96500), we could see more profit booking to $33(~Rs 93000),” Chainani added.
