Covid vaccine hopes spur Indian gold demand despite fewer weddings

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India’s gold demand has picked up since a sharp fall in gold prices from record highs in wake of the recent announcement of vaccines to combat covid, although volume of purchases remains below last year’s level due to postponement of weddings that usually occur during this part of the year.

Gold prices in India have come down to slightly below the psychological mark of Rs 50,000/10 grams, down from all-time highs of Rs 56,00/10 grams in early August.

Prices have mostly been on a downtrend since then on profit-booking and the recent announcement about the readiness of a Pfizer vaccine.

After abysmal sales during a nationwide lockdown imposed in late March, demand was expected to pick up during the peak festive season–which starts in September and culminates with the festival of lights Diwali in November–following a good monsoon season.

“We have seen better demand for gold  after the announcement of the vaccine than what we saw during the festival season,” said Siddharth Gupta, director of Shiv Sahay and Sons, one of India’s largest bullion chains.

People also want to take advantage of the fall in prices because prices of gold are again expected to go up, he added.

Fewer customers

However, the total number of customers are still less compared to last year.

“We are occasionally having some large customers, but most of the demand is coming from our loyal customers. They are buying according to what they can afford because businesses have also been impacted by the pandemic,” said T.K. Chandran, proprietor of DKTM Jewellery, one of the largest gold retail chains in southern India. 

He said one customer had placed a large order for a wedding, even though the wedding date has been postponed to January next year.

On the other hand, social distancing protocols which have put curbs on the number of people who can gather at weddings have taken a toll on gifting of gold ornaments. 

“We wanted a very simple wedding for our son this year, so we had very few guests. Though gifting gold is considered a tradition in our family as well, but we are not so tradition-bound these days,” said A Jawa, mother of a groom and a resident of New Delhi.

Gold as gift

Typically, gold is also gifted as dowry by the bride’s family, a custom that has remained amongst many families despite government regulations and laws to check the practice. 

Demand for gold as gifts increases because it is considered an auspicious metal, but this year many people are also opting for purchases of silver, which is often called as the poor man’s gold. 

“People are often buying a mix of gold and silver ornaments. Some of the families are buying more silver,” Chandran said.

Overall, he said gold sales will be around 10-15% less than last year, though the nationwide lockdown has been eased and businesses are now on a path of recovery.

Historically, the gold prices have moved up during this time of the year as Indians are known to buy gold and silver for the auspicious occasion of festivals as well as weddings, thereby improving physical demand for the yellow metal. 

“The prices are close to Rs. 50,000 per 10 grams now and (there is) no better time to accumulate gold as an investor, especially the ones who missed the recent rally,” said Sunilkumar Katke, head of commodity and currency, Axis Securities.

Stimulus expected

Expectations of additional stimulus measures in the US as well as elsewhere to deal with pandemic, lower real yields backed by higher inflation across the globe may support the gold prices up towards Rs. 52500 – 53500/10 gram levels again, he said.

Many of the customers who traditionally buy gold from retail shops around this time are shifting their purchases to online platforms due to worries over infection.

Sachin Kothari, director at online gold and silver buying platform Augmont said that  more people have shown interest in buying digital gold this year. 

“Before Dhanteras, Augmont saw around 45% jump in the demand for their product compared to last year. Apart from the fact people can buy digital gold for as low as Rupee 1, the availability on various platforms including mobile wallets as well as investment platforms, has helped in increasing the popularity,” he said.

Kothari added that the majority of people who bought digital gold was in a pocket-friendly budget of Rs. 3000- 4000.

Buying Gold digitally through Gold ETF, Gold Sovereign Bond, Digital Gold is also a good option these days, with additional benefits of liquidity, security and effective storage than physical gold,” he added.

Biman Mukherji is a columnist and consulting editor at Indoasiancommodities.com. He has worked for international news organisations such as Reuters, The Wall Street Journal as well as for newspapers like The Times of India. He can be reached at biman.mukherji@indoasiancommodities.in

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