Shining bright or dimming down? Gold Prices for Diwali REVEALED
As the world's second-largest consumer of the gold, India might see a major drop in gold purchases.
If you’ve been keeping an eye on gold prices lately, you’ve noticed they’re near record highs. This increase could potentially lower the demand substantially, according to a report by the World Gold Council (WGC). In particular, the festive season, known for its boost in gold purchases, might take a hit this year.
The Impact on India
India, being the world’s second-largest consumer of gold, is likely to experience a significant decrease in purchases. This development could have substantial economic implications such as halting the global gold price rally, narrowing India’s trade deficit, and supporting the rupee.
According to Somasundaram PR, the Regional CEO of WGC’s Indian operations, high prices in the December quarter could deter potential buyers. Traditionally, this period represents the highest gold sales of the year, as it coincides with the traditional wedding season and major festivals such as Diwali and Dusherra in India. During these cultural festivities, buying gold is considered beneficial and auspicious.
Currently, local gold prices have increased to nearly Rs 61,396 per 10 grams, close to their all-time high of Rs 61,845 earlier in the year. This is nearly a 20% increase compared to prices during the same period last year. The demand in the December quarter is anticipated to be lower than the 276.3 metric tons recorded last year.
Gold Consumption and Future Predictions
The gold consumption in India increased by 10% to 210.2 metric tons in the July-September quarter, thanks to a favorable demand for jewelry and investment triggered by local gold prices. However, from January to September, there was a drop in gold demand by 3.3%, indicating a slower demand in the first half of the year.
The year 2023 might see the demand going all the way down to approximately 700 metric tons, the lowest in three years. This would be down from 774.1 metric tons the previous year. Higher gold prices have led to more people selling their old jewelry and coins, resulting in a 37% increase in scrap supplies to 91.6 tons in the first nine months of the year.
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