The fall in prices to below Rs 30,000 per 10g has brought buyers back into the market; the technical-minded would note a decline below the important support level of the 200-day moving average. Others are just bringing out their cash and credit cards.
A clear sign that buyers are back is the shrinkage of discounts to a near 9-month low, compared to an all-time high earlier this year.
The pickup in demand is not a surprise, given that the last quarter of the calendar year is punctuated by festivals and weddings, and is a time when buying gold is considered auspicious. But it’s significant if you recall that the retail trade had stayed away in the first six months of the year, put off by a 25 percent run-up in prices; Indian imports fell by half in the same period.
These are several factors behind the resurgence in demand.
It’s auspicious – buying during this period is considered auspicious. Indians believe that whatever is bought during this period leads to prosperity.
Good rains – the best monsoon in three years means better income. Two-thirds of gold demand still comes from rural India and it’s a key driver this time round.
Offers and Discounts – they may have come down but are still generous, from waivers of making charges to freebies and free gift vouchers. Easy exchanges and membership packages also are galore. Cash back offers and discounts range from 5 to 45 percent.
New launches – the season features special collections from jewellers and a long-list of designer launches by many big names in the industry.
Region-specific plans — jewellers are also taking a region-specific approach, with designs chosen to cater to sensibilities in a particular part of the country.
Online choices – many online jewellery stores are making big pitches with their inventory, designs and offers, 24X7 viewing and orders, spoiling you for choice.
The All India Gems and Jewellery Trade Federation estimates sale of gold jewelry to grow 40 percent in value and 20 percent in volume this season. The other associations also believe that this is slated to the best Diwali in 4 years in terms of gold jewellery sales.
A little creativity isn’t hurting: Mindful of the rule mandating use of the PAN card for gold purchases above Rs 2 lakh, some jewellers have adjusted their prices. They are also stocking light-weight jewellry in larger numbers.
For the return-minded buyers, this is a good time to buy for more than one reason.
The US Fed will not raise rates aggressively , thus supporting gold buying.
Brexit uncertainty will ensure that gold’s safe haven appeal remains.
Likewise, with the US presidential elections entering the last stretch, the uncertainty will lead to investment in gold.
European Central banks have hinted at paring the bond buying program but that may not happen too soon.
While most central banks already hold gold, some have been increasing their reserves too.
So gold buying in this season is supported by a fortuitous mix of falling prices, cultural factors and the prospect of steady to rising prices. It promises to be a happy festive season!