Notwithstanding the steady fall in gold prices, jewellery demand during this Diwali and Dhanteras is expected to be lower than last year due to high inflation and global uncertainty clouding domestic economic growth prospects.

Jewellery sales during this year’s peak season face more headwinds unlike last year. While the fall in gold price is positive, the steady rupee depreciation and hike in gold import duty have more than nullified its impact. Moreover, most jewellers have not announced any special discounts this season as they are sitting on high-cost inventory and facing high interest rates.

Though the copious monsoon should boost agriculture output and push up rural demand, the increase in the repo rate by the Reserve Bank of India to rein-in spiking inflation should act as a counter-force to tame overall demand and lead to cut in discretionary spends, especially that on gold jewellery.

Late last week, gold prices in the US slipped to a two-year low of $1,661 on the US Fed’s hawkish stand to bring down inflation and recessionary situation across the globe.

Back home, spot gold prices tracked by the Indian Bullion and Jewellers Association were down just four per cent to ₹50,362 per 10 gram on Friday against ₹52,297 logged on August 10, amid high volatility.

Wait and watch

Somasundaram PR, Regional Head (India), World Gold Council, said consumers may restrict themselves to customary jewellery purchases during the festival season as they generally get into wait-and-watch mode when prices fall.

Last Diwali, there was pent-up demand after Covid restrictions were eased and jewellery sales surged due to weddings that were postponed due to the pandemic.

Ramesh Kalyanaraman, Executive Director, Kalyan Jewellers, said with the shradh season (a period deemed inauspicious) ending, there has been an uptick in consumer demand in the run-up to Dhanteras and Diwali.

However, he added the start of this festival season is on a higher base, with overall Diwali festive sales reaching record high levels in 2021.

Gold jewellery demand in December quarter of last year was at a record high of 265 tonnes, according the World Gold Council data.

Retailers bullish

Suvankar Sen, Managing Director, Senco Gold & Diamonds, said retail buyers are optimistic and the recent fall in prices has boosted sentiment during this peak season. Besides, gold is also gaining traction as an attractive long-term investment option amid the global economic uncertainties and geo-political tensions, he added.

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