Indian consumers have bought more gold this Rakshabandhan, enticed by lower domestic prices thanks to the import duty cut announced in the budget.
A quick industry assessment shows healthy demand at the start of the festival season. “Information trickling in from jewellers across India is showing that the demand for gold has gone up by up to 50% in the run-up to Rakshabandhan on Monday, the first auspicious day of the beginning of the festive season in India,” said Surendra Mehta, national secretary of the India Bullion & Jewellers Association (IBJA).
Despite a 5.6% rally in dollar-denominated international gold prices over last month, India’s prices are lower by about ₹2,000 per 10 gram from ₹75,541 per 10 gm on July 22, a day before the budget.
On Monday, the precious metal was priced at ₹73,661 per 10 gm.
The government had cut the import duty on gold to 6% from 15% in the July 23 budget. The average ticket size of purchases shot up as well this Rakshabandhan compared with the festival last year-on average, customers bought 7 grams of gold compared to 3.5-4 gm of gold last year.
A section of the trade said that the volatility in the equity markets in August has also prompted consumers to look at gold, which has given 20% return in the past year. The BSE Sensex plunged 4% in the first week of August before recouping some of the loss last week following improved prospects of an interest rate cut in the US.
“Sales are up by 20-25% compared to last Rakshabandhan,” said Baby George, CEO of Kerala-based Joyalukkas Group. “The average ticket size for gold jewellery has been ₹1.10 lakh, while for diamond jewellery it is ₹1.25 lakh.”
Rajiv Popley, director of Bandra-based Popley & Sons, said international gold prices have surged, thereby slightly diluting the benefits from the import duty cut. “However, brisk Rakshabandhan sales keep us optimistic for the upcoming festive season. Amid global uncertainties, faith in gold remains strong, with robust spending by Indian consumers fuelling retail growth,” he said.
Analysts are of the view that gold prices might head north in the coming months amid prospects of a recovery in the rural economy thanks to monsoon rain.
The overall trend is positive for gold as US rate cut expectations will keep prices supportive at lower levels, said Jateen Trivedi, vice president and research analyst, commodity and currency, LKP Securities.
