person holding a golden durga statue

Indian Gold Demand Faces Downturn Amid Soaring Prices

The World Gold Council (WGC) has issued a warning that the recent surge in gold prices, nearing record highs, may have a detrimental impact on gold demand in India during the festive season, a period traditionally marked by high consumer interest in the precious metal. This surge threatens to drive gold purchasing to its lowest level in three years.

As the world’s second-largest consumer of gold, India’s diminishing purchasing power is poised to exert a cap on the global gold price increase. Moreover, a reduction in gold imports due to decreased demand could potentially aid in reducing India’s trade deficit and provide support to the Indian rupee.

The Regional CEO of the WGC underscored the significance of gold prices, which have escalated in the final quarter of the year, coinciding with the peak sales period. This year’s upswing in gold prices could potentially curtail consumer purchasing power.

Traditionally, gold demand in India experiences a surge towards the year’s end, corresponding with the wedding season and significant festivals such as Diwali and Dussehra. During these celebrations, buying gold is deemed auspicious, further elevating the importance of gold in Indian culture.

This week, gold prices in India ascended to Rs 61,396 per 10 grams, approaching the record high of Rs 61,845 set earlier in the year. However, in contrast to the previous year, the price of gold in the last three months of 2023 is nearly 20% higher, indicating a substantial price appreciation.

As a consequence of these price dynamics, gold demand in the final three months of this year is anticipated to be notably lower, plummeting by an estimated 276.3 tons compared to the previous year. This trend underscores the price-sensitive nature of the Indian gold market, where consumers closely monitor gold’s value, particularly during key celebratory seasons and auspicious occasions.

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