Gold, Silver Purchases Down During India’s Prime Precious Metal Buying Holiday Season

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India is right in the middle of its annual festival season that carries on until the year’s end — as is customary, all eyes are on the purchase patterns for gold and silver during the festival of Diwali.

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When the country emerged from Diwali time, initial data showed that purchase numbers were down compared to the previous year.

Or, if you are an eternal optimist, the numbers this year were “not as bad” as predicted.

Experts like Surendra Mehta of the India Bullion and Jewellers Association (IBJA) had but a few days ago painted a picture of doom and gloom, forecasting gold buying would fall by 50% compared to Diwali 2018.

But guess what? The IBJA found out that its prediction had not come true.

Ajay Kedia, director of Kedia Advisory, said gold buying fell 25% this year, LiveMint reported.

Consumers had purchased about 30 tons of gold on a single day of Diwali called “Dhanteras,” down by an average 10 tons as compared to the last few years.

According to sales figures provided by other agencies in the business, pre-Diwali Dhanteras sales of gold and silver had dropped by about 40%.

According to the Confederation of All India Traders (CAIT), about 6,000 kg of gold was estimated to have been sold till evening on Dhanteras day, compared with 17,000 kg of gold sold on the same day in 2018.

CAIT’s Gold and Jewelry Committee Chairman Pankaj Arora was quoted by India Today as saying there was a decline of business from 35-40%.

Anantha Padmanaban, chairman of the All India Gem and Jewellery Domestic Council (GJC), told the same reporter they expected sales, in volume terms, to fall 20% compared with last year; however, sales in terms of value would be the same as last year because of higher prices.

Different figures, but all confirm one basic thing: gold and silver purchases were definitely down as compared to previous years, as feared.

The reasons for Indians losing some interest in bullion this year are:

  • Rising international prices
  • Increasing value of the U.S. dollar against the Indian rupee
  • Liquidity crunch in the Indian market
  • Rising unemployment
  • Increase in import duty on gold and other expensive metals

The benchmark gold futures in Mumbai touched a record U.S. $562 per 10 grams (Rs 39,885) in early September and were more than 20% higher than last year. Experts believe these prices could test approximately U.S. $580 over the next year.

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India is the second-biggest market for gold, after China.

Many in the Indian media have started writing off gold as an investment option for Indians, but as someone who has tracked this metal over the years, allow me to say this – they will eventually be proven wrong.

The Indian love affair with gold is not over and won’t be for a long time coming.

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