India’s gold obsession is starting to pinch with prices of the precious metal continuing to spiral and touching a record at nearly ₹67,000 for 10 grams. This has forced consumers to moderate gold purchases while including more precious stones in jewellery.
Gold and silver prices rallied on Thursday after the US Federal Reserve maintained that it would cut interest rates three times in 2024. The weakening of the dollar and prospects of increased liquidity coupled with lower interest rates sparked the rally, said experts.
While gold prices surged more than ₹1,000 to ₹66,943/10 grams on the MCX, silver – often touted as poor man’s gold – rose to ₹76,465 for a kilogram. Both gained more than 1%, while benchmark equity indices Nifty and Sensex also gained nearly 1% each.
Gold has gained 6% so far in 2024, adding to a 12% increase last year. The precious metal had outperformed most asset classes in 2022 as well. These gains, though, are impacting the demand for physical gold.
The US dollar and commodities which are priced in dollar terms have an inverse relationship, and so is the case in gold also. “If the dollar moves up, prices of gold and other commodities move down. And if the dollar falls, gold and other commodities may move up,” explained Pranav Mer, vice president of EBG-commodity and currency research, at JM Financial Services.
“Apart from the jump in gold prices, the exam season and advance taxes have impacted some sales in March,” said Suvankar Sen, managing director at Kolkata-based Senco Gold and Diamonds. “We are also seeing a rise in diamond jewellery in 14 and 18 carats,” he added.
At Mumbai’s Zaveri Bazaar, a major hub for gold trading, demand for bullion remained muted with prices at ₹66,968 per 10 gm.
At Kerala-based Kalyan Jewellers, consumers are continuing to buy as per their budgets, even if it means that the volume of gold purchased is lesser. “If there is a sudden spike in gold prices, consumers tend to pause for some time, but are back to shop once prices stabilise, especially for wedding jewellery as it cannot be postponed,” said Ramesh Kalyanaraman, executive director at the jewellery retailer.
For discretionary purchases of gold, consumers often exchange gold during periods of high prices, he said, adding while momentum is strong this quarter, there could be minor disruptions due to campaigning and general elections during April-June.
Data from the World Gold Council (WGC) showed gold demand has fallen in three of the last four periods of general elections. “Demand is unlikely to see a notable uptick in the next couple of months even should prices moderate as the country’s impending general elections will see the movement of gold and cash closely monitored,” said Kavita Chacko, research head, India, at WGC. “It appears that jewellers and consumers alike are awaiting a price correction before they add to their stock or buy jewellery,” she said.
