Indians’ love for gold amid festivities, weddings to prevail over price concerns

Though apprehensions remain over a further increase in prices denting affordability, experts are banking on Indians’ love for gold to outweigh price concerns especially since demand for this precious metal typically increases towards the end of the year due to festivities and weddings

Geopolitical tensions in the Middle East have led to a surge in gold prices sparking worries over retail purchases in India in the run up to Diwali, which is followed by the wedding season. An estimate by Crisil says that since the conflict began in early October, gold prices have surged 13-15 percent to around Rs 60,000 per 10 gm.

And, according to Vipul Shah, Chairman, Gem & Jewellery Export Promotion Council (GJEPC), gold prices are unlikely to witness a sharp reduction from the current levels at least in the next six months. Given that the world is in an era where two active wars are going on, at best prices can see a reduction of 2-3 percent, he adds.

“Until we see a ceasefire (in the conflict between Israel and Hamas) we don’t see gold prices coming down, and I don’t see that ceasefire coming soon. For the next 6 months, we are heading towards Rs 60-65,000 and in the longer run I won’t be surprised if gold prices reach levels of Rs 70,000,” Shah told Moneycontrol.

Somasundaram PR, Regional CEO, India, World Gold Council, says that anecdotal feedback from the industry suggests that though gold is seeing strong interest, consumers remain intensely price conscious due to volatility and price rise in the near term.

“Due to geopolitical tensions in the Middle East and given that gold is regarded as a safe-haven asset, the price of gold has been surging on the backdrop of the same. It’s important to consider that gold prices are responsive to global developments. If gold prices decline, there may be a rise in demand for gold, particularly in December, driven by the wedding season fervour,” Azare said in a note on November 7.

Consumer sentiment strong

Though apprehensions remain over a further increase in prices denting the affordability of consumers, experts are banking on Indians’ love for gold to outweigh price concerns especially since demand for this precious metal typically increases towards the end of the year given festivities and weddings.

The data proves the above conjecture. Though in July-September 2023, global gold demand, as well as gold jewellery consumption, softened on a year-on-year basis amid a continued rise in prices, in India demand during the same period grew by 10 percent on-year and sale of gold jewellery was also up 7 percent partly due to festive demand, according to a report by the World Gold Council released on October 31.

Somasundaram PR is optimistic as he says that given the steady macroeconomic scenario, a good monsoon, and strong consumer sentiment, demand is likely to remain robust in the last quarter. “The ensuing wedding season will be another trigger for consumers to consider buying gold around Diwali. The strong case for gold among professional investors to mitigate portfolio risk is also very positive for gold demand at this time,” he adds.

GJEPC’s (the apex body of the gem & jewellery trade in India) Shah is also confident about good festive demand for gold jewellery citing healthy consumer sentiment. Shah believes that Indians, especially during this time of the year, are not concerned by elevated costs as seen in the past.

Somasundaram concurs saying that trade feedback suggests that consumers have accepted the price levels of Rs 60,000 per 10 gram, and so any downward correction could trigger a significant jump in sales during October-December.

Risks remain

However, while experts are betting on the symbolic auspiciousness as well as the investment benefits gold carries in India to push up demand during the festive and wedding seasons, the risks are not completely absent.

Even as GJEPC’s Shah is bullish about festive gold sales, he does flag concerns over the fallout on India if the war in the Middle East widens, adding that so far New Delhi is not as impacted by global factors. World Gold Council’s Somasundaram has also highlighted the fact that any sharp rise in prices could delay the release of pent-up demand for gold following a relatively weak first half of the current calendar year.

But when it comes to festivities and weddings, Indians can barely do without gold even if they make adjustments owing to steep prices. If one goes by 33-year-old professor Supurna Dasgupta’s experience, who is busy planning her wedding scheduled for next month, she could not avoid buying this precious metal.

“I would have bought more of the dainty jewellery that is priced lower as it uses less gold, but I did not because of how expensive it was,” Dasgupta told Moneycontrol.

As GJPEC’s Shah puts it, “Consumers who are bound to buy gold will buy gold.”