Gold prices rocket in India as festive season sales gather momentum

Geopolitical issues, a weak rupee, and a favourable festive season helped gold prices rise a record 23-25 per cent in India during the current year, touching over ₹77,770 per 10 grams in Mumbai on October 21.

On October 18, the price of gold was ₹77,110 per 10 grams. Gold prices had hit a record ₹79,000 per 10 grams five days ago in many Indian markets. Industry analysts say prices of 24-carat gold rose by 2.26% in the last week and by 1.93% between October 10-18.

''Despite gold prices touching record highs of ₹79,000/10 grams, anecdotal feedback from industry indicates a resurgence in gold buying due to various ongoing festivals, with demand largely driven by investment sentiment and wedding-related purchases'', says Sachin Jain, Regional CEO, India, World Gold Council.

 ''Several global factors such as U.S. elections, good U.S. data and inflation will influence the dollar but keep gold demand high in India and can expect a multi-year bull run for gold'', a spokesperson of the Gem & Jewellery Export Promotion Council (GJEPC) tells Fortune India.

Globally, prices of gold were going up in recent weeks, mainly anticipating further rate cuts by the US Federal Reserve. In that scenario, prices could go up further. Analysts say gold prices rose by $830 during the year in the international markets, mainly due to escalating geo-political tensions in West Asia and between Russia and Ukraine. Another reason is the weakening Indian rupee against the dollar. Everyday prices of the metal are calculated in India based on the value of the Indian rupee against dollar and the spot prices in international markets. Investors exiting the stock market and investing in gold, which is considered a safe long-term investment, is another factor, say experts.

Experts expect gold demand uptick will continue this Diwali and till the end of the year due to the wedding season. Buying gold is considered auspicious during festivals like Dhanteras and Diwali. From gold jewellery to gold bars, gold coins consumers plan at least a token purchase as a matter of tradition as gold buying is generally believed to herald good fortune, wealth and prosperity.

The retailers have also invested in new designs and innovative usage of technology to make daily wear, and lighter jewellery considering heightened gold prices, to invite consumers to come into the stores. There is also an expectation of increased demand from rural areas, driven by improvements in robust economy and consumption. Good monsoons and higher crop sowing this year are anticipated to boost rural incomes further, potentially leading to higher gold purchases. Investment demand including digital gold, gold ETF’s, gold bars and coins remains strong, with purchases also emerging from new channels such as e-commerce and Q-commerce, he says.