A sudden fall in gold prices after the Indian government reduced the import duty in the Budget and a recovery thereafter will likely trigger fresh buying interest in gold jewellery among consumers during the current festival season.
Gold prices fell from ₹72,600 per 10 grams to ₹69,100 after Finance Minister Nirmala Sitharaman announced that the import duty on the precious metal will be reduced to 9 per cent. However, prices moved up thereafter to touch ₹71,378 on Monday, amid renewed festive buying interest and fear of prices moving up further.
Kumar Jain, National Spokesperson, Indian Bullion and Jewellers Association, said jewellery sales during this Ganesh Chaturthi increased by 20 per cent compared with last year and customers are buying light weight jewellery for decorating Ganesha and gold modak.
Prices to top ₹75,000?
Consumers’ confidence in gold has grown multi-fold as prices have jumped 43 per cent this year compared with ₹50,000 per 10 grams sold last Ganesh Chaturthi, he said.
Along with wedding demand, Jain said sales should touch 75 tonnes by end of this year compared to 40 tonnes sold during festival season last year.
The industry expects gold prices to touch ₹75,000 per 10 grams by end of this year given the global turmoil and persisting concern over US Fed rate cut.
Moreover, the central banks including that of China have stopped accumulating gold as part of their forex reserves and gold should gain once they restart buying gold, said Jain.
Suvankar Sen, Managing Director & CEO, Senco Gold and Diamonds, said the demand has been robust over the last two months compared with the June quarter on back of festival season.
Global uncertainty
Gold prices have been stable after the sudden fall and the only challenge will be when it start moving up suddenly. However, he said the jewellery demand should hold fort till end of this year and it will be difficult to predict March quarter given the global uncertainty.
Himank Sharma, Director, Crisil Ratings, said the duty cuts to their decadal lows have come at an opportune time for the gold jewellery retailers as they start stocking for the festive and marriage seasons from the latter half of August.
However, the inventory losses on the existing stock due to the price cuts will be partially mitigated by the reduced spends on marketing and discounts, as demand revives. All said, profitability will see a marginal dip on-year to 7.2 per cent, he said.