By Rajendra Jadhav
MUMBAI- A rebound in gold prices to a record peak has dashed the Indian bullion industry’s expectations of a lucrative festival season after their hopes were boosted by a deep cut in import duty two months ago to the lowest in a decade.
“Everyone was feeling positive about demand after the duty cut since we were seeing a spike in interest, and it really made us think the festival season would be amazing,” Prithviraj Kothari, president of the India Bullion and Jewelers Association (IBJA), said.
“But with prices bouncing back right before the festivals, demand might end up being 20 percent lower than usual in terms of volume.”
The festive season in India, the world’s biggest gold consumer after China, traditionally has been the time when people buy the most gold. It is considered auspicious as a present at weddings and during festivals such as Diwali and Dussehra. This year, Dussehra is on Oct. 12, and Diwali will be celebrated in late October.
Kothari said buying habits were shifting, with consumers spreading their purchases throughout the year and focusing on price rather than waiting for special occasions.
Since last year’s festive season, prices have risen by more than a quarter. Consumers’ spending power has not kept pace, Amit Modak, chief executive of PN Gadgil and Sons, a Pune-based jeweler, said.
“Consumers are opting for lighter, more affordable jewelry to stay within budget,” he said.
In late July, India cut import duties on gold to 6 percent from 15 percent, bringing local prices down to a four-month low of 67,400 rupees ($803.16) per 10 grams. Since then, they have risen by 13.2 percent to a record high of 76,331 rupees, tracking a rally in global markets.
After the duty cut, demand was robust, and jewelers made big bookings with jewelry manufacturers for deliveries ahead of the festive season, Ashok Jain, proprietor of Mumbai-based gold wholesaler ChenajiNarsinghji.
“But now, jewelers are not taking delivery of the entire booked quantity. Many jewelers are taking delivery of only half of their bookings,” Jain said.
A Kolkata-based jewelry manufacturer, who asked not to be named, said jewelers were avoiding stocking heavy, more expensive, jewelry that was less in demand.
Dealers have also reduced the premium they are charging compared with following the duty cut to try to spur demand. – Reuters
