New Delhi: Indian retailers may entice consumers with pictures of gold medallions embossed with Hindu gods as the festive season nears its peak, but seasonal gold sales are expected to stay on par with last year’s level because of record-high bullion prices.
Shops have stocked up for Wednesday on hopes that daily demand would pick up for the Dhanteras festival, one of the five most auspicious days in the Hindu calendar.
International gold prices hit their best level in nearly three decades on Wednesday at $838.40 an ounce.
“Overall demand would turn out to be about the same as last year,” said a senior Mumbai-based bullion dealer at one of India’s largest private banks.
“But today and tomorrow, I am expecting our daily sales to rise to 200-300 kg from 40-50 kg last week, because of the festival season,” he added.
Consumers customarily jam shops on Dhanteras, when prayers are held to invoke prosperity.
The day comes two days ahead of Diwali, or the festival of lights, when bringing gold or silver to households symbolises good fortune.
Bullion dealers said they expected the demand to shift more towards gold coins and bars this season, as the bullish price trend was expected to last for three to four months.
Last year, Indians bought 186 tonnes of gold coins and bars, a rise of 34% over the previous year, World Gold Council data showed.
Gold, which has risen more than 25% this year, last hit an all-time high of $850 in January 1980.
Eye on investments
Analysts say that gold could touch $900 an ounce by March due to expectations that the US Federal reserve will cut interest rates further, a slumping dollar and soaring crude oil prices.
“We are expecting 20 percent of the total sales we have targeted during the festival season in the next two days alone,” said a senior official of the state-run Union Bank of India.
He said they had set a target of about 100 kg of gold sales during the festival period this year, which usually begins at the end of August and peaks in October.
“Overall demand is a little sluggish, particularly in the southern region,” he said.” But it is nearly intact in the markets in northern and western India.”
India’s largest lender, State Bank of India, this week said it had started selling gold coins.
Sales of medallions were brisk at a gold and jewellery exhibition in New Delhi, which was opened on Tuesday by one of India’s largest gold importers, the state-run MMTC.
“People are buying for investments,” said Ashwini Kapoor, deputy general manager of precious metals at MMTC. ”They think that prices will shoot up even further.”
He said sales of gold and silver medallions hit Rs4 million on Tuesday alone at the exhibition.
India’s gold imports between January and August had risen, due to relatively low prices, by 86.5% from a year ago.
A World Gold Council official said he expected peak festival season demand to rise 10-15% from a year ago, though many retailers said they expected demand to stagnate.
India’s gold consumption between October to December 2006 was 207.7 tonnes.