Well-timed price slump has Indian gold traders expecting a bumper festival season
Good monsoons and price weakness ahead of the 9-night Navratri festival, which kicks off the Indian festival and wedding season has traders rather excited
Posted: Monday , 03 Oct 2011
The great Indian gold rush is on once again and appears to have moved into an overdrive in India with the onset of the festive season. Even as the country celebrates Navratri, representing prayers to and celebration of Goddess Durga, the manifestation of power, the 9-nights festival has ensured India's gold demand is surging like never before.
"It is a time of purification and prayer after the shraddh period, when one mourns the dead. Navratri is traditionally an auspicious time for starting new ventures and given the propensity of Indians to buy gold, demand for the yellow metal is expected to jump by 70% this year, to cross 150 metric tonnes,'' said Bombay Bullion Association's Hemendra Kothari.
Traders estimate, demand during the festival season last year was around 90 tonnes. In India, the 9-nights festival marks the onset of the festival and marriage season, when demand for gold traditionally peaks.
Though the perception still prevails in certain quarters that making purchases during the shraddh period is a bad omen, bullion houses said a number of people turned up to select their jewellery design and make advance payments to book their ornaments on the last day of the shraddh, as gold prices came down significantly.
"Gold rose to a record $1,921 on September 6 in the international market. Then, there was a sudden fall in the price of gold, which has added to the festive spirit among people, who are also preparing for the upcoming wedding season,'' said Mohandasbhai Shah, owner of Jaipur Diamonds Jewellery House.
The slump in gold prices from a record high has fuelled demand. At the end of September, and just before the start of the Navratri festival, gold declined 8.8% for three consecutive days. Some traders called it the biggest three-day drop since the failure of Lehman Brothers Holdings in 2008.
"This put the brakes on gold's 16% rally this year,'' said Mangesh Sodhi, bullion analyst with a broking firm here. ``It also ensured that everyone in India suddenly became a buyer,'' he added.
Prithviraj Kothari, president of the Bombay Bullion Association said most showrooms were completely empty during the shraddh period, but with the fall in price, there were long queues with customers clamouring for the purchase of gold coins and biscuits.
Traders also point to the fact that though a slide in prices was enough to get people to buy, good monsoon rains have also driven up rural purchases.
With rural incomes on the upswing, India's gold imports could get a boost to around 1,000 metric tonnes this year.
While imports of gold has already crossed 550 tonnes till July, imports during the second half of 2011 are bound to touch 500 tonnes.
According to the World Gold Council, investment demand for gold in India jumped 78% to 108.5 tonnes in the three months ended June 30, 2011, which was the second-highest quarter on record. Consumption rose to a record 963.1 tonnes last year, driving imports to the highest level ever at 958 tonnes, according to data from the council.
During the nine-day festival, which culminates in Dushera or Vijayadashami, which is the triumph of good over evil, the various forms of the Mother Goddess Durga are worshipped with fervor and devotion. The festival is celebrated across the country, irrespective of region.
Haresh Bhai, of Premji Walji Jewellery House, insisted that ``people are buying more gold during Navratri this time as compared to last year. We are likely to see heavy demand all of this month. This will lead to higher imports.''
Despite the high price all this year, the evolving market trends suggest a further jump in prices during the Diwali season, which falls at the end of October this year.
Indians are known to develop an affection for gold coins and bars and gold ornaments during the festival and marriage seasons, and the onset of the auspicious Navratri period has brought back the lustre to gold retailers.
India is set to import between 100 to 150 tonnes of gold this festive season as compared to the 90 tonnes last year, with the country's total gold demand crossing 1,000 tonnes by March 31, 2012, traders said.
"Had the rupee not fallen so sharply in the month of September, the demand could have been even higher. Gold is a compulsory buying item during this time and for marriages and is never an option in India,'' he added.
The Indian rupee, which fell to its lowest level in two years in the third week of September, plays an important role in gold prices, as India relies on imported gold. Traders insist buying could pick up over the next few weeks if prices stabilise, ahead of the important Diwali and Dhanteras festival in the last week of October and the wedding season that will continue till the end of the year.
Navratri is considered the only Indian festival where the fun, joy and excitement continues for nine days at a stretch. ``Navratri is also considered an auspicious time to buy gold jewellery, so people make the most of the occasion to indulge in a jewellery shopping spree,'' said analyst Sodhi.
"After a lean shraddh season, the gold business community has reason to smile. People love to purchase gold and heavy-set diamond ornaments during this time as they think the things they buy are blessed by the Goddess.
As Navratri begins, so does the shopping,'' said Sivabhai Mehta, bullion retailer.
Another interesting facet is that during these nine days, with every night culminating in a dance ritual in the neighbourhood, mothers ensure that their unmarried daughters are dressed in different attire and jewellery for all the nine days.
"Many also use the occasion to bag a suitable groom for their unmarried daughters. It is used as an occasion by the women in the community to catch up on different jewellery designs, colourful attire and suitable brides or grooms for their children. Gold is used as a magnet to draw them in during this time,'' said Mansoorbhai Vyas, gold retailer.