As the Dhanteras and Diwali festivals approach, Indian consumers are undeterred by soaring gold prices, continuing to invest in gold bullion in hopes of favorable returns amid a fluctuating stock market. Industry experts report that the robust demand from the world’s second-largest gold consumer could further bolster global gold prices, which reached all-time highs last week. This rising demand for imports may also impact India’s trade deficit and exert pressure on the rupee.

“Despite the record-high prices, gold remains a top choice for consumers this Dhanteras. With gold outpacing the stock market in returns, we’re witnessing strong demand for coins and bars,” stated Saurabh Gadgil, chairman of PNG Jewellers. Dhanteras, celebrated on Tuesday, is traditionally seen as an auspicious day for purchasing gold, making it one of the busiest days for gold sales in India.

Local gold prices soared to an unprecedented Rs.78,919 per 10 grams last week, reflecting a more than 31% increase compared to last year’s Diwali prices. In contrast, India’s NSE Nifty 50 index has fallen approximately 7% since reaching a record high on September 27.

According to Gadgil, investors are looking to diversify their portfolios, increasing their investments in gold and silver. Prithviraj Kothari, president of the India Bullion and Jewellers Association (IBJA), indicated that while the turnover for this year’s Dhanteras is expected to exceed last year’s due to higher prices, the volume may remain steady or slightly decline.

On the ground, Indian dealers were charging a premium of up to $1 per ounce over official domestic prices, including a 6% import tax and a 3% sales levy, a shift from last week’s $4 discount. Additionally, local silver futures reached a record high of Rs.100,081 per kilogram last week, driven by strong demand for silver coins and bars. “Silver has shown better returns than gold in recent months, fueling interest from consumers,” said Chirag Thakkar, CEO of Amrapali Group Gujarat, a prominent silver importer.

Source: Reuters