Prohibitive prices of gold are likely to spook the buying sentiments of people ahead of the festive season that begins with Ganesh Chaturthee. Jewellers are already staring at a subdued prospect as footfall has already thinned out. Gold (22 carat) is currently selling at over Rs 1,45,000 per 10 grams plus three per cent GST and an average 20 per cent making charge. They add up to nearly Rs 1.80 lakh per 10 grams. The current rate is 45 per cent higher than the price of standard gold last September.
Although the present rate is a tad lower than the August prices when the yellow metal had crossed Rs 1,50 lakhs per 10 grams before tax, it is still unlikely that people will buy gold at such high levels. The uncertainty in geopolitics with wars continuing to rage between Russia and Ukrain and US-Israel and Iran, the value of the yellow metal may only be going to hard en in the days to come.
The lingering tension in Hormuz has worsened the oil situation in major parts of the world including in India. The rising crude prices have put an additional burden on rupee and made imports of gold more pricey. With US treasury yields continuing to slump, gold prices are likely to further esca late as demand for the low-yielding US bonds will soften. Prices of commodities in the country have gone through the roof and the government has done precious little to stimulate demand, resulting in people reducing consumption and shying away from spending.
The May hikes in customs and import du ties have made buying physical bullion and jewellery significantly more expensive for retail buyers. Worse, the prodding by Prime Minister Narendra Modi to put a stop on gold purchase kind of killed the buying ap petite of people. In less than a decade, the yellow metal prices have firmed up by nearly500 per cent. Instead of buying fresh gold, a massive chunk of buyers now opt for trade in or swap their legacy jewellery for new designs or use gold loans for liquidity rather than making fresh investments.
Affordability factor has forced buyers to plumb for lighter designs instead of heavy traditional ornaments. Corporate retailers have put a premium on lighter ornaments to suit the pockets of middle class buyers. That consumers have been shying away from new purchases was evident in the fact that automobile makers admitted that deep discounts in showroom prices of vehicles have failed to revive consumer demand.
The slump in sales has demonstrated that there is a marked indifference among common people towards merchandise purchase. White goods makers, wholesalers and retailers have also shown a similar trend. Gold imports in August fell nearly 30 per cent year-on-year tumbling to nearly 45 tonnes as against 64.2 tonnes during the same month last year. Another reason for the falling demand for gold may be the thinning out of discounts being offered by re tailers. The drop in discounts may be due to high prices of gold. Gold besides being a safe haven from investment point of view, it has a lot of ritual istic value in our culture.
In a way, this is the prime reason why India is the second largest consumer of gold in the world. People here regardless of their economic and social status, buy gold for family weddings. No marriage can be solemnized in India with out gold being exchanged. Buying gold is also considered auspicious. However, with gold prices never showing any signs of re treating, this year’s festive season may see subdued sales.
(By Sisir Mishra)
