Gold festival demand in India hits hurdle as prices jump

MUMBAI • Gold buyers in India, the biggest market after China, may give jewellery stores a miss in the run-up to the Deepavali festival this year because of a surge in domestic prices to the highest level in more than two years. Shares of the country’s biggest listed jewellers tumbled yesterday.

Bullion has climbed in local markets because of a weak rupee, and rising prices just before the celebrations of Deepavali and Dhanteras aren’t good for demand, said Chirag Sheth, an analyst with Metals Focus Ltd in Mumbai. Plus, “overseas spot gold has, in the last two or three days, shown the first signs of breakout”, he said. “If this trend continues, then it’s going to be a dampener.”

The most auspicious day of the year to buy gold is Dhanteras, which falls on Nov 5, two days before the Hindu festival of Deepavali. Wearing or gifting of jewellery is thought to bring good fortune during celebrations and weddings. The last quarter of the year is the season of peak demand, with Indians buying almost 240 metric tonnes on average in the past four years, according to data from the World Gold Council.

Gold futures on the Multi Commodity Exchange of India Ltd have climbed about 10% this year to the highest since July 2016, while overseas gold fell 6%. Analysts expect the rupee to extend its worst run of losses in 16 years. The South Asian nation imports almost all the gold it consumes.

“Demand is very low this year,” said Nitin Khandelwal, chairman of the All India Gem & Jewellery Domestic Council. Still, he remains optimistic of a spurt in purchases around Deepavali “as no marriages can happen without jewellery”.

While people will make their customary purchases for the festival, the higher prices may trim the amount of gold being bought, he said. That’ll cool some optimism among merchants who’d been encouraged by a doubling of gold imports from a year earlier in the past two months.

Titan Co, the nation’s largest maker of branded jewellery by market value, lost as much as 2.2%, while Tribhovandas Bhimji Zaveri Ltd tumbled 3.6%, far exceeding a decline of 0.6% in the benchmark index. — Bloomberg