Gold demand could strengthen during the peak festive season (October- December), aided by sustained investment interest, wedding and occasions-related jewellery purchases, and a potential boost from consumption tax cuts. However, elevated prices — and any renewed surge — may curb overall demand, according to a World Gold Council (WGC) report released today.
Gold prices in India have closely mirrored international movements, with a weaker rupee (down 3% y-t-d) magnifying domestic price gains. As of mid-September, prices had risen 7.0% month-to-date to INR 106,863/10g, bringing the y-t-d increase to 44%. Notably, signs of demand interest have helped narrow domestic price discounts,4 which briefly flipped to a marginal premium in late August and again in mid-September. This marks a noteworthy change, as domestic gold prices had been trading at a near-sustained discount since December.
Gold demand in India is showing signs of a pickup with the onset of the festive season, led primarily by a surge in physical investment demand for bars and coins, according to market reports and anecdotal evidence from trade channels. Investment interest is reportedly outpacing jewellery purchases, as consumers are drawn in by the uptrend in prices and expectations of further increases.
The report adds that conversations with jewellery manufacturers and retailers suggest that jewellery demand, while present, remains uneven. High-value, wedding-related purchases have begun and are holding steady, while high prices have dampened lower-ticket daily-wear and discretionary buying, prompting a shift to lower carat products.
Large retailers are reporting higher footfalls, supported by aggressive marketing and promotional campaigns, along with plans for new store openings. Smaller retailers, in contrast, continue to face muted demand. Robust exchange activity, where old gold jewellery is traded in for new, has also been a key contributor to overall sales. While volumes remain lower y/y, sales value has risen aided by the higher gold prices.
Bullion dealers have reportedly stepped-up purchases since early September, likely in anticipation of stronger seasonal demand and a potential boost from increased consumer spending from the forthcoming reduction in Goods and Services Tax (GST).The tax cut on a range of items, including consumer goods, durables, and automobiles-takes effect from 22 September, just as the festive season enters its peak following a 16-day inauspicious period, WGC said.
Overall, expectations for a strong festive season are building across the gold trade, it added.
