Much to the delight of jewellers, Indian consumers are making a scramble for gold in the build-up to Diwali on October 23, after a lacklustre festive season last year.
Sales of gold jewellery and coins in October so far have accelerated in the range of 15-25% more than a year before, although it is still early to firm up a precise forecast of demand this Diwali and Dhanteras, considered auspicious for the precious metal purchases.
Last year, jewellers were badly hit by a crunch in raw material supplies following imposition of a 10% import duty and the central bank?s 80:20 rule, which mandated that at least one-fifth of imported gold must be reserved for re-exports. Many jewellers in Delhi and Mumbai witnessed up to 40% drop in sales last Diwali.
?After months of slowdown, things are finally beginning to look up,? a spokesperson for Tanishq, the country?s largest jewellery chain, told FE. ?All the purchases that people had postponed are finally being made,? he said, adding that lower gold rates in recent days had helped accelerate demand. Gold prices in Delhi dropped over 8% in 2014 so far to R27,370 per 10 grams as of October 10, tracking a subdued trend overseas and aiding the sales.
As per Mehul Choksi, chairman of Gitanjali Group, jewellery demand is expected to rise this fiscal, but for investment demand to pick up, authorities need to trim the high import duty and also relax the 80:20 rule.
Suvankar Sen, executive director at Senco Gold, the largest jeweller in eastern India, said consumers who had deferred purchases in the hope that prices could go down below R25,000 per 10 grams if the new government loosens import restrictions, are back in the market after seeing that authorities are unlikely to intervene.
Consequently, with festive demand rising, gold premiums, which had crashed to as low as $1-2 per ounce in July after the Reserve Bank of India allowed more entities to import the precious metal, have now jumped to $12-14 per ounce.
To boost sales, while Tanishq last week offered gold coins to consumers for purchases above certain limits, others are offering up to 25% discount in making charges. Market sources said jewellers are expected to ramp up various discount offers and schemes in the week through Diwali to lure customers.
Even online purchases of gold products have gathered momentum. Vishwas Shringi, founder of a leading online jewellery store, voylla.com, said: ?The festive season has become a profitable period for traders, jewellers as well as e-commerce players. The e-tailers are replenishing their stocks to meet the increased demand for jewellery.? The company has witnessed a 26% spike in sales of precious jewellery and a whopping three-fold jump in those of silver and gold coins so far in October from a month before.
?This is going to be a better Diwali because anti-gold sentiments have, indeed, subsided unlike last year when the government was cracking down on imports and jewellers also said they wouldn?t sell coins. Plus, sourcing gold has become easier than last year when confusion about the 80:20 rule had affected imports before Diwali,? World Gold Council managing director (India) Somasundaram PR said. The council has forecast the second half of 2014 to witness higher demand than 380 tonnes a year before.