Gold has always held a special place in the hearts of Indians, particularly during festive seasons when the demand for the precious metal typically surges. This year, as the festivals of Dhanteras on October 29 and Diwali on October 31 approached, gold demand saw a temporary increase, according to Commerzbank’s commodity analyst, Carsten Fritsch. However, this rise was not as pronounced as in previous years, primarily due to record-high gold prices that have made buyers more cautious.
Festivals Spark Interest, but Prices Dampen Sales
The recent festivals prompted many to consider purchasing gold as part of traditional celebrations. Dhanteras is especially significant, marking the beginning of the Diwali festivities, when purchasing gold is seen as auspicious. Yet, as traders reported, the enthusiasm for gold was tempered by its soaring prices. According to Fritsch, while the quantity of gold sold during this period saw a rise, it was markedly lower than typical levels due to the financial strain posed by current market prices.
Interestingly, the value of sales experienced a notable uptick. As gold prices reached new heights, even a modest increase in volume translated into significantly higher revenue for traders. This phenomenon underscores the strong cultural significance of gold in India, which often outweighs the financial considerations of its cost.
Shift in Consumer Preferences
Another key takeaway from this surge in demand is the shift in consumer preferences regarding gold purchases. Fritsch noted that the proportion of gold bars and coins sold was higher than usual, indicating a strategic pivot among buyers. Many consumers opted for these forms over traditional gold jewelry, likely to avoid the increased production costs associated with crafting jewelry. This trend reflects a more pragmatic approach to gold investment, as consumers balance cultural practices with economic realities.
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Discounts Signal Weakening Demand
However, as the festive celebrations wrapped up, reports indicated a weakening in demand towards the end of the week. In response, traders began offering discounts, dropping prices by $5 per troy ounce compared to just days earlier, when they commanded a premium of $1 over the market price. This quick reversal highlights the volatility of gold demand and prices, particularly in reaction to seasonal buying patterns.
