In the early days of October, the price of gold had fallen to US $1,183.27 an ounce, its lowest this year. So you buy on the low and sell on the high, right? Well, the Indian consumer is doing just that, pushing the price up, much to the delight of the bullion market.
It’s Diwali here in India, the biggest festival of the nation. A festival of lights, good food and, well of course, the time to buy gold. Appetite for physical gold in India rebounded this week with the low price encouraging customer demand. With the Chinese customer behaving in the same predictable manner as their Indian counterpart, the price of spot gold in Asia has perked up, even touching a 6-week high for a brief while on Thursday before slipping to $1,240 an ounce. The continent, more specifically China and India, accounts for about two-thirds of the world`s gold demand.
From a pure investment viewpoint, analysts said a decline in the equities market also improved the outlook for gold. In India, to boost sales, some jewelers were offering up to a 100% discount in the charge for designing and making gold jewelry, and other attractive schemes.
Somasundaram PR, Managing Director for India at the World Gold Council, told CNBC that the gold demand in India this Diwali was testimony to the trust India’s citizens have put in a recovering economy.
In India, gold prices climbed by about $2.00 (Rs 150) to about $455 (Rs 27,925) per 10 grams earlier in the week, as buying activity picked up on the occasion of Dhanteras, a part of the overall Diwali festival. Last year on Dhanteras, though, the precious metal had stood at about $513 (Rs 31,400) per 10 grams.
It was the same story in China, too, where demand picked up during the week-long National Day holiday, and once the gold price had gone below the US $1,200 an ounce mark this month.
Indian bullion analysts expect the present bull run to continue until February, supported by the wedding season, something that we at MetalMiner said way back in September.
Gold buying fell out of fashion for a while in India due to a combination of factors such as falling international prices and the imposition of limits on the import of gold by the Indian Government. According to a forecast by the World Gold Council, India was likely to import between 850 and 950 tons of gold in 2014.