With a decade-low tariff in place and both the festive and wedding seasons approaching, there is expected to be a mad dash for gold in India this year, according to a new report from Nikkei.
The country is the world’s second-largest gold consumer after China. India's festival and wedding season begins Thursday, leading up to Diwali on Nov. 1. During this auspicious period, gold purchases surge as it symbolizes luck and financial security. Gold is also a popular gift for brides and families during weddings.
India saw gold imports surge to a record $10.1 billion in August—more than double compared to a year ago and triple July’s $3.1 billion—according to the Indian Commerce Ministry.
The Nikkei report says that the spike followed the government's late-July decision to cut import taxes on gold and gold dore, a semi-pure alloy, by 9%. The duties now stand at 6% for gold and 5.35% for gold dore, the lowest rates since June 2013, after remaining above 10% for over a decade.
Finance Minister Nirmala Sitharaman said the tax cut aims to boost domestic value addition in gold and jewelry. Following the duty reduction, retail gold prices dropped by around 4,000 rupees ($47.80), with 10 grams of 24-carat gold priced at approximately 70,000 rupees and 22-carat gold at 65,000 rupees.
Ashish Gupta, a retail jewelry store owner in a marketplace in the Indian capital, told Nikkei: "Most of the local consumers are waiting for the festivals to make gold purchases as not many prefer to buy during the ongoing Shradh period."
"However, starting Oct. 3, we are expecting a huge footfall, especially on Dhanteras festival on Oct. 29 prior to Diwali when it is considered even more auspicious to buy gold," he continued.
"We do receive inquiries nowadays about the jewelry pieces in our store and gold price for the day but the buyers say they would only purchase during the coming festivals," said a salesperson in New Delhi.
Kavita Chacko, India research head at international trade association World Gold Council recently added in a note: "Purchases previously deferred are now materializing, and there is increased interest in heavier pieces of jewelry."
She added: "Industry participants anticipate that this momentum will continue, though they are closely monitoring the crucial festive and wedding season sales."
