Diwali Gold Loses Shine as Prices Rise
Festival season is a peak period for gold sales in India. However, demand has recently been slack as the extra expense leaves customers hesitant, write Rebecca Bundhun and Gregor Stuart Hunter of The National.
Arendra Thakur, a commander in the Indian navy, splashed out 250,000 rupees ($4,560) on gold jewelry for his wife and daughter at a jeweler in Mumbai over the weekend.
Prices were higher than last year but he could not forgo the annual tradition of buying gold for the Diwali festival, he says. "Every year I purchase some items for Diwali. Everybody buys gifts for the celebration."
The gold price in dollars is up on the festive season last year, and weakness in the Indian rupee against the dollar pushes that rate even higher. As a result, gold prices in India in rupees are much higher: about 32,000 rupees per ten grams, compared with about 27,000 rupees during the festival last year.
Even though jewelry shops across India have been busy as usual with customers for Diwali, shop owners say the expense is dampening demand. "Prices are high, so customers are a little hesitant to buy gold right now," says Dheeraj Jain, the co-owner of Surana Gold, a jewelry shop in Mumbai.
Most purchases were normally made during the festival and even just after, so it is too early to predict whether it will turn out to be better or worse than last year, he adds. "Let's hope for the best," says Jain.
Rajendra Gurjar, the owner of the Gurjar Gold and Diamond jewelers, says sales are flat so far on last year. "Gold prices are increasing," he says. "But that means that customers can gain on the gold they buy."
Diwali is keenly watched by international gold traders because of the effect it has on physical gold sales.