Festive hopes fade for Indian gold industry after price hike | commodities

The holiday season in India, the world’s biggest consumer of gold after China, has traditionally been the time when people buy the most gold. It is considered an auspicious gift at weddings and during festivals like Diwali and Dussehra. This year, Dussehra is on October 12 and Diwali will be celebrated at the end of October.

Kothari said buying habits are changing, with consumers spreading their purchases throughout the year and focusing on price rather than waiting for special occasions.

Since last year’s holiday season, prices have risen by more than a quarter. Consumer spending power has not kept pace, said Amit Modak, chief executive of PN Gadgil and Sons, a Pune-based jeweller.

“Consumers are opting for lighter and more affordable jewelry to stay within budget,” he said.

TAX REDUCTION AND MARKET ADJUSTMENTS

In late July, India cut import duties on gold to 6 percent from 15 percent, pushing local prices to a four-month low of 67,400 rupees ($803.16) per 10 grams. They have since risen 13.2 percent to a record high of 76,331 rupees, tracking a rally in global markets.

After the duty cut, demand has been robust and jewelers have booked heavily with jewelery makers for deliveries ahead of the festive season, said Ashok Jain, owner of Mumbai-based gold wholesaler Chenaji Narsinghji.

“But now, the jewelers are not taking delivery of the entire reserved quantity. Many jewelers only get half of their bookings,” said Jain.

A Kolkata-based jewelery maker, who asked not to be named, said jewelers were avoiding stocking heavy, more expensive jewelery that was in less demand.

Dealers have also reduced the premium they charge compared to the tax cuts to try to boost demand.

Indian dealers this week charged a premium of up to $3 an ounce over official domestic prices, including 6 percent import duty and 3 percent sales tax, down from a premium of up to $20 in the last week of July .

In August, India’s gold imports rose 216 percent from the previous month to 136 metric tons as jewelers anticipated strong festive demand.

The subsequent rise in prices caused imports to fall by 60 tonnes in September, dealers estimated.

First publication: 09 October 2024 | 14:56 IST