The record-setting rally in gold prices is poised to suppress demand during peak festival season, starting from Navratri, Dussehra, and Dhanteras (Diwali), as customers are holding back their jewellery purchases in anticipation of a fall in prices.
Gold prices have risen by nearly 54 per cent compared to last year, when they were closer to ₹71,000 per 10 grams, during the same period.
Gold prices increased by ₹1,438 per 10 grams to hit another new high of Rs 109,475 per 10 grams on Tuesday against ₹1,08,037 per 10 gram logged on Monday on a firm trend in the global markets.
On MCX, the most traded gold futures for October delivery jumped ₹982 to hit a fresh peak of ₹1,09,500 per 10 grams, tracking global cues amid growing expectations of a US Federal Reserve interest rate cut next week.
In the overseas markets, Comex gold futures for December delivery rose to hit an all-time high of $3,698 per ounce. Also, spot gold appreciated to hit a record high of $3,658 per ounce.
Consumers shift to lighter designs
Avinash Gupta, Vice Chairman, All India Gem and Jewellery Domestic Council, said consumers are adapting to the price surge by opting for lighter pieces and experimenting with varied caratages that better suit their budgets.
“While we do anticipate about 10-15 per cent dip in volume, the overall value of sales is expected to grow, driven by strong emotional and cultural ties to gold, especially during weddings and auspicious occasions,” he said.
Aksha Kamboj, Vice President, India Bullion & Jewellers Association and Executive Chairperson, Aspect Global Ventures, said the demand in volumes is expected to drop by 20-30 per cent with the sharp price rise impacting consumer sentiment.
The emotional and cultural ties ensure gold purchases will continue broadly during this time of year at the same levels, but consumers will be more careful and restrained, she said.
Prithviraj Kothari, Managing Director, RiddiSiddhi Bullions, said gold jewellery demand this festival season is likely to remain subdued despite strong cultural sentiment.
While weddings and festivals will support some essential buying, discretionary demand is expected to remain weak as consumers either downsize purchases or shift toward lighter designs, he said.
Urban buyers may delay, rural affordability pressures rise
Urban buyers may delay purchases, while rural demand could soften due to affordability pressures amid high prices, he added.
Renisha Chainani, Head of Research, Augmont, said buyers may opt for lighter pieces, 18K gold jewellery, or coins, as opposed to heavier ornaments.
While the key sentiment will remain cautious driven by affordability pressures, he said retailers may cut making charges, make attractive exchange offers and appeal to customers with gold saving schemes.