Gold gets its festive groove back in India

The Indian gold market is experiencing a festive resurgence, fueled by lower prices and the upcoming wedding season. Buyers are returning to jewellery stores following a period of high prices, which deterred many consumers. Foot traffic in jewellery stores has begun to increase in the October-December quarter, with a larger share of visitors making actual purchases, according to Crisil Ratings. This trend is reflected in data from 76 organized retailers, which contribute to about a third of the industry's revenue.

The recovery in gold demand comes after a challenging year marked by a steep rise in import duty, which was increased to 15% in May. This hike, coupled with the surge in gold prices that pushed retail rates to record levels, discouraged many consumers from buying. However, the recent price correction has provided a much-needed boost to affordability, encouraging consumers to revisit the market as the festive and wedding seasons approach.

Retailers have reported a rise in showroom traffic ahead of key festivals, such as Dhanteras. Kalyan Jewellers, for instance, has noticed a pick-up in customer visits. The recent price correction has instilled confidence in customers, making them more willing to purchase smaller gold coins and bars, which offer more accessible ticket sizes.

Samit Guha, CEO and Managing Director of MMTC-PAMP India Pvt., India's largest precious metals refinery, noted that consumers are currently taking a more measured approach, opting for smaller purchases rather than committing to larger ones at once.

Despite this positive outlook, the seasonal pickup is not expected to completely erase the weakness seen earlier in the year. The World Gold Council projects that India's gold imports will decline to a six-year low this year, as the country relies heavily on imports to meet domestic demand. Harshal Barot, Principal Consultant at London-based Metals Focus, observed that demand has been sluggish throughout the year so far.

However, he anticipates that the festive season's spike in demand will not be enough to bring volumes back to pre-year levels, primarily due to the light-weighting of jewelry in recent years and the growing share of 18 karat, 14 karat, and 9 karat gold in overall sales.