Invitations to weddings have been sent, and the festival season is anticipated to be exciting. India’s gold jewelers benefit from the pandemic’s delay because it allows them to plan for a recovery during their busiest sales season.
Indians often increase their purchases of gold jewellery for wedding celebrations in the fourth quarter, while coin and bar sales for investments soar during a series of festivals that climax in Diwali, or the Festival of Lights, which is celebrated this year in November.
However, throughout the pandemic, they have largely refrained from purchasing the precious metal since prices have risen and travel restrictions have damaged the economy, postponed marriages, and diminished festivals. Daily infection counts are currently at seven-month lows, and rising vaccination rates are increasing hope for a better holiday shopping season.
Due to a 17% drop in gold prices in the local markets from their record high in August of last year, as the precious metal’s safe-haven value dwindles amid a global economic recovery from the epidemic, jewelers are further optimistic that sales volumes would increase.
India consumes between 60 and 70 percent of its gold as jewelry. According to data from the World Gold Council, Indian consumers purchased 315.9 tons of gold-use jewelry in 2020, which is nearly equivalent to the sum of sales made in the Americas, Europe, and the Middle East. China purchases the most, 433.3 tons, overall.
Pent-up demand and reduced pricing, according to Ashish Pethe, chairman of the All India Gem and Jewellery Domestic Council, could have increased last quarter’s gold sales by as much as 15% over the same period two years prior.
According to figures from the World Gold Council, Indians purchased 194.3 tons of gold between October and December of this year, compared to 186.2 tons during the same time previous year.
Regarding the high sales season of the previous year, Pethe claimed that 2020 was an anomaly. Gold prices have “mellowed down and are advantageous this quarter; weddings are also highly prevalent.”
Due to the large stimulus programs implemented by central banks during the epidemic, which caused a rush of investor capital into exchange-traded funds, gold prices rocketed to a record high last year. As the Federal Reserve gives the impression that it may start reducing asset purchases, investor demand for the precious metal is now declining.
Suki Cooper, an analyst at Standard Chartered Plc, stated that “the physical market will set the floor in the absence of robust investor interest, and recent trade data speaks to important hubs responding to recent price declines in gold.” As the market approaches its peak buying season, India’s imports of bullion have also increased and pent-up demand has been high, she added.
Indian gold purchases decreased all year long, not just over the holiday season. Sales could increase by as much as 50% for the entire year of 2021 after falling to a more than two-decade-low of 446.4 tons in 2020, according to Chirag Sheth, a consultant with Metals Focus Ltd.
Sheth stated that “if prices remain where they are in the run-up to the festival season, then sales will be good” despite warning that potential safe-haven factors that could increase bullion still exist, particularly the energy crisis that may result in high inflation and have an impact on global growth.