Gold Rush in India Predicted

Expectations for Increased Gold Demand in India

Due to the combination of a decade-low tariff and the upcoming festive and wedding seasons, a surge in gold demand is anticipated in India this year, as per a recent report from Nikkei. India, being the world's second-largest gold consumer after China, is about to enter its festival and wedding season, which begins on Thursday and culminates with Diwali on November 1. During this period, gold purchases typically increase as it is considered a symbol of luck and financial security. Additionally, gold is a common gift for brides and families during weddings.

Record Gold Imports in India

According to the Indian Commerce Ministry, gold imports in India soared to a record $10.1 billion in August, more than doubling from the previous year and tripling July's $3.1 billion. This spike is attributed to the government's decision in late July to reduce import taxes on gold and gold dore, a semi-pure alloy, by 9%. The duties now stand at 6% for gold and 5.35% for gold dore, marking the lowest rates since June 2013, after being above 10% for over a decade.

Impact of Tax Cut on Gold

Finance Minister Nirmala Sitharaman stated that the purpose of the tax cut is to stimulate domestic value addition in gold and jewelry. Following the duty reduction, retail gold prices fell by around 4,000 rupees ($47.80), with 10 grams of 24-carat gold priced at approximately 70,000 rupees and 22-carat gold at 65,000 rupees.

Anticipation of Increased Gold Purchases

Ashish Gupta, a retail jewelry store owner in a marketplace in the Indian capital, shared with Nikkei that local consumers are waiting for the festivals to make gold purchases. He expects a huge increase in customers starting October 3, especially on the Dhanteras festival on October 29, which precedes Diwali and is considered an even more auspicious time to buy gold. A salesperson in New Delhi confirmed that while there are inquiries about the jewelry pieces in their store and the daily gold price, buyers say they would only purchase during the upcoming festivals.

Deferred Purchases Materializing

Kavita Chacko, India research head at the international trade association World Gold Council, recently noted that previously deferred purchases are now materializing, with increased interest in heavier pieces of jewelry. She mentioned that industry participants anticipate this momentum to continue, though they are closely monitoring the crucial festive and wedding season sales.

Bottom Line

With the combination of a decade-low tariff and the upcoming festive and wedding seasons in India, a surge in gold demand is anticipated. The government's decision to reduce import taxes on gold has already led to a decrease in retail gold prices, and industry participants are closely monitoring the upcoming festive and wedding season sales. What are your thoughts on this anticipated gold rush in India? Do you think it will have a significant impact on the global gold market? Feel free to share this article with your friends and discuss. Also, don't forget to sign up for the Daily Briefing, which is available every day at 6pm.