Rural purchases expected to support jewellery buying!

Expecting to grow festive jewellery buying demand from rural areas 

Time & again our veteran media player cite, Veda literature that, People like festivity! Well recently Kavita Chacko, Research Head, India-World Gold Council expect that, Rural purchases expected to provide support! Yet, Kavita said, “High prices coupled with an inauspicious period in the Hindu calendar for making purchases of valuable items from mid-September to early October, kept consumers away from jewellery buying. 

However, market reports indicate early signs of a resurgence in gold buying due to various ongoing festivals, with demand largely driven by wedding purchases. Retailers are actively implementing marketing campaigns to stimulate sales. 

The surge in demand following the import duty cut, which coincided with some festivals, has been tempered by record-high prices. There is an expectation of increased demand from rural areas, driven by improvements in overall consumption. Favourable monsoons and higher crop sowing this year are anticipated to boost rural incomes, potentially leading to higher gold purchases. 

Investment demand for gold bars and coins remains strong, in part fuelled by the rise in gold prices and expectations of further increases. This trend is further enhanced by sales across online marketplaces, making gold more accessible.”

In the row, Saiyam Mehra, Chairman of All India Gem and Jewellery Domestic Council said, "Normally, gold demand rises in north India during Diwali festival. However, the yellow metal demand is down by 15-50% in the October 1st two week this year because of sudden spurt in prices to record high level.  

Between March and September, India imported 522 tonnes of gold this year. During January - September, India's gold import stood at 660 tonnes as against 448 tonnes in the same period last year. Clearly, India imported 20-25% more gold this year. As a knee jerk reaction, customers hold their purchases due to sudden price increase. 

We estimate 22 tonnes of gold will be sold during Dhanteras as demand for all types of jewellery is set to emerge. Gold prices may see another Rs 1000/10 Gms rise from the current level, translating $30 increase to $2750/oz by Diwali. We see $50-60/oz correction by mid-November as by then US Presidential election will be over and shadow will be clear over US Fed's 25 bps interest rate cut, and geopolitical conflicts.”  

While Rajesh Rokde, Vice-chairman, All India Gem and Jewellery Domestic Council, expect that, “Gold prices may rise to Rs 80,000/10 Gms by Diwali. Gold is emerging as safest haven during the ongoing geopolitical turmoil and global economic uncertainty. Gold price is heading towards $2900/oz as projected by several global economists.  

We saw strong buying when the Indian government cut import duty. Indian consumers have been more attractive towards gold due to continuous high returns seen compared to other asset classes. The strengthening of US dollar is unlikely to have any impact on gold's demand in India."  

While market player in general focus on yellow metal, few observer feel that Silver does not justify significant allocation to portfolio despite stellar run in 2024!  

According to a report by Anoop Vijaykumar and Divyansh Agnani from Capitalmind Financial Services Pvt Ltd, Silver does not warrant a significant allocation to portfolio despite stellar run in the 2024. The report focuses on the unintuitive advantage of uncorrelated assets.  

Portfolio with 62% Gold, 35% Nifty and a small 3% Silver allocation would have seen significantly lower volatility than the Nifty while matching its return while a 32% Gold and 68% Nifty portfolio would have exceeded the Nifty’s long-term return!