Gold's Golden Run Sours Indian Festival Sales as Prices Soar

India is poised for a significant downturn in gold jewelry sales during the highly anticipated upcoming festival season. This anticipated drop is primarily driven by record-high bullion prices, which are compelling consumers in one of the world’s largest gold markets to explore more affordable alternatives.

According to Surendra Mehta, national secretary at the India Bullion and Jewellers Association, the volume of ornament demand is projected to decrease by as much as 27% compared to the same period last year. This decline is expected to manifest over the crucial three-week buying period, which typically commences with the Navratri festival in September and extends through to Diwali in October. Mehta noted that consumers, particularly those residing in major urban centers, are actively postponing their spending on gold due to the elevated costs.

Gold holds immense cultural significance in India, traditionally serving as a cherished gift for weddings and special occasions, as well as a favored investment vehicle. This festive season is typically a period of robust demand for jewelry, culminating in events like Dhanteras, which marks the start of Diwali festivities and is a particularly auspicious time for purchasing gold and silver. For local sellers, revenue generated during these few weeks often dictates their entire year's financial performance. However, this year, bullion prices have surged by nearly 50% compared to the equivalent festive period last year, challenging established purchasing patterns.

Local gold prices are currently hovering above 100,000 rupees ($1,128) per 10 grams, or one lakh rupees in the Indian numbering system. This steep price point is a major deterrent for consumers who typically allocate a fixed budget for their gold purchases, often resulting in them settling for lighter pieces than they initially intended. Globally, spot gold prices have more than doubled over the past two years, reaching an all-time high of $3,791.10 per ounce this week, further exacerbating the local market pressure.

The strain on demand has been evident throughout much of the year, with India purchasing 17% less jewelry between April and June compared to the previous year. A World Gold Council report from July projects that total purchases of the precious metal could drop to their lowest level in five years by 2025. Delhi-based jeweler Arham Ahmad corroborates this trend, stating, "Most of the demand now is for lightweight or more affordable pieces." He observes that customers visiting his shop are opting for small ornaments, some weighing as little as 2 grams, confirming that "Demand for heavier jewelry has been subdued for quite some time."