Whalesbook
International spot gold prices have plummeted by 5.5%, reaching a one-week low of $4,115.83 per ounce, marking the steepest decline since August 2020. This global price correction is attributed to a rising dollar and investors booking profits after gold reached record highs, influenced by expectations of US interest rate cuts and sustained safe-haven demand.
Consequently, the Indian gold market, which was closed on Tuesday for Diwali, is expected to open on Wednesday with lower prices. Surendra Mehta of India Bullion & Jewellers Association (IBJA) predicts prices could correct to Rs 1.22-1.23 lakh per 10 grams. He noted that if prices stabilize at this level, the demand surge seen during Dhanteras will likely continue, benefiting consumers planning weddings.
Gold prices had fallen on Monday from a high of Rs 1.34 lakh per 10 grams (including GST) recorded on Dhanteras (October 18-19). Retail prices on Monday, after a 3 percent GST, were around Rs 1,31,461 per 10 grams.
The festive season has witnessed healthy demand for gold, with investor interest in physical gold rising. Kavita Chacko from the World Gold Council highlighted that despite high prices affecting jewellery consumption, sales have recently picked up, driven by wedding-related purchases and the ongoing wedding season. Rajesh Rokde of the All India Gem & Jewellery Domestic Council reported that while sales volume was on par with the previous year, the value of sales saw a remarkable growth of 35-40%, a trend expected to continue post-Bhai Duj.
Impact:
This news is positive for Indian consumers looking to buy gold, especially for wedding purposes, as lower prices reduce financial pressure. For the jewellery retail sector, it indicates sustained demand, potentially boosting sales volumes and value growth, and supporting businesses reliant on the wedding season. The increased investment demand also signals continued interest in gold as an asset.
Rating: 7
Difficult terms:
Spot gold: Gold that is available for immediate delivery and payment.
Dhanteras: An auspicious Hindu festival, often associated with purchasing gold, silver, and other valuables.
GST (Goods and Services Tax): A consumption tax levied on the supply of goods and services in India.
Investment demand: The portion of overall gold demand driven by investors, often seen as a safe-haven asset or hedge against inflation.
Wedding season: The period of the year when most weddings occur in India, leading to increased demand for gold jewellery.