Despite the importance of jewellery in Indian culture, gold purchases have slowed down in the last month. The main reasons behind this trend can be traced to the increase of gold prices due to a devaluation of the rupee. Indeed, while a month ago 10 grams of gold was priced at Rs. 26,500 and now the price is Rs. 27,300. This price increase also lead to an increased flow of scrap gold of around 15%.
Despite the higher availability of gold in India in the last period, people prefer to use their household gold instead of spending money on new jewelleries. Indeed, according to a working in the India Bullion and Jewellery Association (IBJA), 30-40% of the jewellery demand coming from the bridal segment has now come to be met by household gold, also meaning that gold imports in the country are reducing significantly.
Despite the fact that All India Gems and Jewellery Trade Federation (GJF) expects the increase in demand of gold in the country to be led by the jewellery segment in 2015. The only people who seem to be benefiting from this situation are middle class households. That is, they are releasing a huge quantity of their gold in order to exploit the rise in gold prices. Above this, even if the wedding season demand starts again, the possibility of this to have an impact on gold sales is still controversial.
Indeed, from the investors point of view, an equity market gives better returns in this period compared to the gold market, thus investments in gold are not particularly high nowadays, considering that they also expect discounts offered by gold bullion dealers.
Source: Ge Trends