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Bridal season demand spurs hope for gold jewellers

Latha Venkatraman Mumbai | Updated on March 12, 2018 Published on January 17, 2012

V   -  Business Line

Indian consumers are not yet rushing into jewellery stores to buy their favourite metal ahead of the bridal season but jewellers say there is some pick-up in demand compared with last month.

“Now that the wedding season has started, demand is slightly better. We are seeing a 15-20 per cent increase in purchases this month compared with the previous month,” said Mr Rajesh Mehta, Chairman, Rajesh Exports Ltd.

Although gold prices have eased, they remain high keeping many consumers away.

Gold demand in India, the world's largest consumer of the yellow metal, is mainly manifested through purchases of jewellery but in recent times there is also a growing interest in coins and bars, bullion dealers and jewellers said.

“Demand has not yet picked up as prices are still quite high,” said Mr Prithviraj Kothari, President, Bombay Bullion Association. Pure gold prices were hovering around Rs 27,000 per 10 gram, a rate considered high by consumers, said Mr Kothari.

Although Indian demand is not price elastic, consumers tend to wait for some stability in prices before making any purchases. Jewellers said demand for the bridal season has been picking up, especially in smaller cities and towns.

Buying ahead of weddings is the on-going demand that jewellers have been witnessing but what is missing is the additional purchases that often accompany bridal season demand, said Mr Akshay Bardia, Director of Raipur-based AnoopchandTilokchand Jewellers.

Indian gold demand is likely to have declined last year compared with the previous year mainly because the yellow metal prices hit historic highs numerous times during the year. International spot gold prices had moved up to an all-time high of $1,920 per ounce in September on strong investment demand spurred by dollar weakness. The Euro Zone debt crisis and the slow pace of growth recovery in the US kept the dollar weak.

Gold often moved in the reverse direction of the dollar as it is considered a hedge against inflation and a safe haven asset.

New highs

In India, gold prices continued to move up to new highs well beyond September and into December mainly because the rupee depreciated sharply against the dollar. In early December, spot gold in Delhi market hit a record high of Rs 29,540 per 10 gram.

The rupee had moved down to around Rs 54 per 1$ in December. The home unit has now recovered and is around Rs 51. Gold demand in India during 2011 is likely to be around 875-880 tonnes compared with 958 tonnes in the previous year, Mr Kothari said.

“Demand was lower compared with the previous year because gold prices had risen by 40 per cent in 2011,” he said.

Along with record high gold prices, high inflation also impacted liquidity and that, in turn, hit gold buying, said Mr Kothari.

According to the World Gold Council, sharp volatility in gold prices and inflation impacted discretionary spending, which includes gold purchases.

Jewellers are now keeping an eye on how the bridal season demand will pan out in the first quarter of 2012. “In smaller towns people do not stop making purchases for wedding,” Mr Bardia said. His jewellery firm has outlets in Raipur, Kolkata and Gondia.

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Published on January 17, 2012
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