The annual festival usually sparks a rush for gold, but this time gold demand could fall for the first time in four years as runaway prices put gold out of reach for many Indians.
Gold price is approaching $Jewelers said the price of 80,000 pieces per 10 grams curbed new purchases and prompted customers to replace old jewelry during the December quarter, when festivals and weddings trigger gold buying.
“There is a surge in prices and volumes may fall by 10-12 per cent (during the festive season), but in terms of value, there will be marginal growth,” said Suvankar Sen, managing director and chief executive of Senco Gold, which operates 165 stores.
The spot price of 24-karat gold (99.5% pure) has surged nearly 30% in the past year to a record high $79,479 (including 3% GST) per 10 grams, according to commodity exchange MCX. Prices have increased by 6% in the past month alone, coinciding with purchases during this year’s holiday season from October 3 to October 29.
Sen said uncertainty ahead of the U.S. election early next month, concerns about war with Israel and Iran and last month’s cut in key U.S. policy rates were driving the price increase. A Trump victory could lead to a weaker dollar, further boosting gold prices.
Senco Gold shares rise 9.5% $In the month to Friday, the price stood at 1,378.7, in line with gains in gold prices. Surendra Mehta, national secretary of nodal trading body Indian Bullion and Jewelers Association (IBJA), said a 10-12% drop in trading volume during the festive season is “extremely rare” and was only seen in 2020 due to the COVID-19 pandemic. This situation will only occur in the quarter affected by the epidemic.
Consumption decline
According to the World Gold Council (WGC), jewelery consumption in India fell by 8% to 137.3 tonnes during the 2020 festive quarter. The fourth quarter of every year is the Dhanteras festival, and demand during this period often accounts for 30% of the annual demand. Apart from this, there is also a demand for marriages in this season.
Data from the World Gold Council (WGC) showed that Indians consumed 202 tonnes of jewelery in the first half of this year, down 8% from the first half of 2023, due to high prices, but the organization is yet to release September quarter figures.
Interestingly, according to International Monetary Fund data cited by the World Gold Council, gold is favored by central banks in 2024, including the Reserve Bank of India, which added 45 tons of gold in the calendar year to August, making it Became the banker with the highest net purchases after Turkey’s central bank. India’s official gold reserves are approximately 848 tons.
Central bank purchases have been one of the catalysts for a nearly 30% rise in prices over the past year. Data from the World Gold Council show that central bank demand increased by 5.1% annually in the first half of 2024.
old jewelry exchange
The rise in gold prices has also prompted consumers to replace old gold jewelry with new ones.
Saurabh Gadgil, chairman and managing director of PN Gadgil Jewellers, said: “Following the sharp increase in prices, the ratio of exchanging old gold for new jewelry in our stores has increased from an average of 20 per cent to around 35 per cent.”
While Gadgil accepts the possibility of an industry-wide decline in sales, he estimates that sales at his 48 stores this holiday season will be the same as a year ago, as “concerns about further price increases may push consumers to buy ahead of a large number of weddings.” ”.
The launch of PN Gadgil Jewellers has witnessed the demand among jewelery companies on Dalaal Street. Relative to issue price $480 yuan per share, listing time is $On September 17, the BSE price was 834, a premium of 74%. The stock closed at $It was 747.55 on Friday.
In the past month, after the U.S. policy rate was cut by 50 basis points to 5%, gold prices rose, the U.S. dollar index rose 3% to 102.93, and the U.S. 10-year Treasury bond yield rose 9.7%. 99% of GDP, so there are concerns about financing.
Typically, when the dollar rises, gold falls. But rising bond yields point to rising inflation, which is why gold, seen as an inflation hedge, has surged.
