Gold prices in India have dropped to their lowest level in seven months, which may increase demand during the current holiday season when people typically purchase more coins and ornaments.
Strong purchases made during the festival season of October to December, which is seen as a lucky time to buy and wear gold, may support the worldwide market.
The optimistic forecast, however, will probably lead to an increase in imports and put pressure on the nation’s trade imbalance, which has already grown as a result of high oil prices and a decline in purchases of about 12% in the first half of 2023.
Suvankar Sen, managing director of Kolkata-based Senco Gold Ltd., said: “Overall, the sentiment is positive and this price drop has come at the best time for the market.” Store traffic has grown, and during the festival season, he predicted that Indian demand will be 10% to 15% greater than it was the previous year.
India, the world’s second-largest buyer of gold, has seen prices decline by approximately 7% since May, when they reached a record high. Although the Israel-Hamas war has stopped the decline in world gold prices, they are under pressure from rising US bond rates because investors believe the Federal Reserve will continue to maintain a tighter monetary policy for a longer period of time. A non-yielding asset like gold often suffers from higher interest rates.
Shares of important jewelers in India have risen thanks to the possibility of increased demand. Tribhovandas Bhimji Zaveri Ltd. has increased 5% this month, Kalyan Jewellers India Ltd. has increased 15%, and Titan Co. of the Tata Group has increased roughly 4%. Since its July listing on Indian marketplaces, shares of SAIF Partners-backed Senco have increased by a factor of two from the offer price.
The World Gold Council predicted in August that India, the world’s most populous country, may see a decline in demand this year to between 650 and 750 tons, which would be the lowest level since the coronavirus epidemic struck the nation in 2020, down from 774 tons in 2022. The group should shortly make available its statistics for the quarter between July and September as well as its projections for the entire year.
Demand may remain steady this year, as opposed to early predictions of a steep fall, according to Chirag Sheth, chief consultant of Metals Focus Ltd. He remarked, alluding to the Hindu festival of lights, “If prices stay around these levels until Diwali in November or fall more, then we can see a fairly good increase in sales.”
Consumer price benefits will vary depending on the local currency, according to Sheth, who added that a weaker rupee might offset the benefits of reduced global gold prices. Since India imports practically all of the gold it needs, primarily from Switzerland, the value of the rupee is declining, making gold more costly in the country.
