Festive cheer: Gold glitters on Dhanteras but demand outlook still fragile

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Updated: Oct 26, 2019 1:34 AM

Rajiv Popley, director at Popley Group, said: “People, who had deferred purchases earlier this fiscal, are back in the market, as prices have fallen marginally. As a company, so far today, we saw a 20% rise in sales, which will continue until midnight.”

Shares of Tribhovandas Bhimji Zaveri dropped 6.65%, PC Jeweller fell 4.07% and Titan Company 2.94% on the BSE.

A softening of prices from its peak in the past one month prompted consumers to lap up gold this Dhanteras — considered auspicious for the purchases of the precious metal — on Friday, jewellers told FE. But people’s buying behaviour was still marked by caution, probably reflecting anxiety over subdued disposable income due to a broader economic slowdown, some of them added.

At Rs 38,587 per 10 g, spot gold prices on MCX were up 22% on Friday since last year’s Dhanteras (which was observed on November 5). However, having hit a peak of Rs 39,011 per 10 g on September 4, gold prices started easing. This stoked renewed consumer interest in the precious metal. On Friday, the gold rate was up by about Rs 300 per 10 g, reflecting Dhanteras demand.

Rajiv Popley, director at Popley Group, said: “People, who had deferred purchases earlier this fiscal, are back in the market, as prices have fallen marginally. As a company, so far today, we saw a 20% rise in sales, which will continue until midnight.”

Some of the established jewellers FE spoke to saw their sales rising by up to 15-20% by Friday evening, thanks to growing trust in purity and designs of their products. But keeping with the trend in recent years, small players — especially in places like Delhi’s Karol Bagh and Chandni Chowk — witnessed subdued growth of about 5-10% in footfall in their stores. Since small jewellers — mostly concentrated in rural areas — make up for roughly 70% of the country’s demand, the overall gold sales this Dhanteras remained below par.

Some jewellery stocks came under selling pressure and tumbled up to 6.6% on Friday. Shares of Tribhovandas Bhimji Zaveri dropped 6.65%, PC Jeweller fell 4.07% and Titan Company 2.94% on the BSE.

Somasundaram PR, managing director (India) at World Gold Council, said: “The sharp rise in the gold price and deep discount in the bullion market impacted trade and the consumer outlook in Q3, however, Dhanteras seems to have changed this. A good monsoon and softening of prices coupled with attractive offers by retailers in an effort to down stock, has boosted overall buying sentiment. Greater awareness among consumers of long term price trends is also supporting buying.”

“Footfalls are reported to be better compared with the start of the season, and a long wedding season supported by a significantly higher number of auspicious occasions this quarter is expected to buoy buying.”

Elevated gold prices had dented domestic demand earlier this fiscal, driving down imports by 10.4% year on year in the April-September period to $15.8 billion. In fact, the imports crashed 63% in August and 51% in September. While prices in the global market have risen in the past one year, a weak rupee against the dollar and the 10% customs duty have driven up domestic prices at s sharper pace. However, as Popley points out, domestic gold recyling has surged, partly making up for reduced imports.

Tanya Rastogi of Lala Jugal Kishore Jewellers, who is also a director at Indian Bullion and Jewellers’ Association (IBJA), said: “Usually, 70% of our annual (calendar year) sales target is achieved in the first three quarters and 30% is met in the last quarter to which Dhanteras is a major contributor. This time, however, the entire year has been dull, so the last quarter is seeing the pent-up demand spilling over and partly making up for the subdued consumption earlier.” While disposable incomes of rural households have remained subdued, a shift in the consumer choice — from the unorganised to the organised sector — has also accelerated. These have dented the appeal of neighbourhood stores.

Ishu Datwani, founder of Anmol Jewellers, said: “We have seen good footfalls since morning. In fact, the footfalls have improved from Navratri. We have surpassed our expectations and seen a rise of 25% in sales. Some clients have even pre-booked their orders for Dhanteras. It is also the onset of the wedding season. Although light-weight products are becoming increasingly popular among young buyers, this year we have seen more movement in the luxury category as well.”

Aditya Pethe, director at WHP Jewellers, said consumer behaviour is undergoing a change. “Two changes in trend. Customers are now buying jewellery all through the year so when you look at year-on-year sales, it is not completely dependent on the festivals. Sec

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