Mumbai: Gold sales on the most auspicious day in India to buy the metal are off to a slow start as high prices and concerns about an economic slowdown deter customers.
Prices in the world’s second-biggest gold consumer remain near the record reached last month, while the country’s growth has slipped to a six-year low, unemployment is rising and a lending crisis is affecting cash flow. India’s gold imports fell for a third month in September to the lowest in more than three years as jewellers cut purchases on poor demand.
“What is keeping the buyers away are the high prices and the slowdown in the economy,” N. Anantha Padmanaban, chairman of the All India Gem and Jewellery Domestic Council, said by phone. “People have their savings but they are safeguarding it for the future as they don’t know what is in store for the next two to three months. So the fear is holding them back from spending.”
Today’s Dhanteras comes ahead of Diwali on Sunday, and buying gold is considered auspicious. India’s peak wedding season begins soon after the festival, with the final quarter typically strongest for demand.
Gold sales in the run up to the festival are down about 40% from last year, although “we hope we can narrow this drop on Dhanteras and end the day only about 20% lower from last year,” Padmanaban said, adding that sales tend to see some momentum in the evening as buyers come to the stores after work. The outlook for demand looks bleak until December-January, unless the government comes up with concrete measures in the next budget, he said.
Benchmark gold futures in Mumbai touched a record 39,885 rupees ($562) per 10 grams in early September and prices are more than 20% higher than last year. Indian jeweler shares slid Friday. Titan Co., the country’s biggest by market value, declined 2.9% in Mumbai, halting a 10-day rally. Tribhovandas Bhimji Zaveri Ltd. slumped 5.8% and PC Jeweller Ltd. dropped 4.1%.
Domestic gold demand was subdued during previous festivals this year, and higher prices could dent overall demand in Diwali as well, Kishore Narne, head of commodities and currency at Motilal Oswal Financial Services Ltd., wrote in a note. “Elevated prices will remain a point of concern,” and gold is expected to test 41,500 rupees over the next 12 months, he said.
Beyond Diwali, a good monsoon and attractive offers by retailers in an effort to reduce stock has boosted buying sentiment and, coupled with a long wedding season, may buoy buying in the last quarter of the year, according to P.R. Somsundaram, managing director for India at the World Gold Council.- Bloomberg
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