Gold rush: Higher prices fail to dent demand during festive period; industry body bullish about wedding season
Local gold prices have eased about 3 percent after touching their highest level in five years in late October.
Mumbai/Bengaluru: Demand for physical gold gathered steam during a key festival week, shrugging off a recent downtrend going into the traditional busy wedding season, while other major Asian hubs saw limited activity.
India, the second biggest bullion consumer after China, celebrated the Dhanteras and Diwali festivals this week, when buying gold is considered auspicious.
“We were initially skeptical about Diwali demand but it jumped this week, despite higher prices,” said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the eastern Indian city of Kolkata.
The price rise gave confidence to consumers that gold will provide better returns than other asset classes in coming years and prompted them to increase purchases, said Saurabh Gadgil, managing director of PNG Jewellers.
Dealers in India were offering discounts of up to $3 an ounce, the lowest in six weeks, over official domestic prices compared with the $7 discounts last week. The domestic price includes a 10 percent import tax.
Jewellers were reporting better Diwali sales than last year in almost all regions, said Nitin Khandelwal, the chairman of All India Gems and Jewellery Domestic Council.
“Demand will remain robust even in coming weeks as the festive season will be followed by a wedding season.”
Meanwhile, global benchmark spot gold prices were on track for an about 1 percent decline for the week, which would be its biggest weekly fall since mid-August, but the dip did little to trigger fresh buying elsewhere in Asia.
In China, premiums were at $4-$6 per ounce, little changed from $4-$7 last week.
“Demand is still not good as the dollar is strong,” said Ronald Leung, chief dealer, at Lee Cheong Gold Dealers in Hong Kong.
A higher greenback makes it more expensive for holders of other currencies to buy gold, which is priced in dollars.
Physical demand in China slowed a little as some wholesalers had already restocked their inventories in the last two weeks, said Samson Li, a Hong Kong-based senior precious metals analyst at Refinitiv GFMS.
The dometic gems and jewellery industry has urged the government to increase the mandatory PAN card limit to Rs 5 lakh and above and reduce the import duty on gold to atleast 5 percent in the Budget
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