Rising Gold Prices Drive Indians to Prefer Coins and Bars Over Jewellery During Dhanteras Festival 2023

Overall gold sales during Dhanteras were 10-15 per cent lower compared to last year. (Representative)

Mumbai:

Due to escalating gold prices, Indian consumers opted for coins and bars instead of traditional jewellery during Saturday's Dhanteras festival, motivated by anticipation of continued appreciation in the precious metal's value, industry officials informed Reuters.

Dhanteras, which initiates the five-day Diwali festival of lights, is traditionally considered favorable for gold purchases and ranks among the busiest gold-buying days in India, the world's second-largest consumer of this precious metal.

According to Rajesh Rokde, chairman of the All India Gem and Jewellery Domestic Council, overall gold sales volume during Dhanteras decreased by 10-15 per cent compared to the previous year, although total value increased significantly due to higher prices.

"Gold jewellery demand experienced a decline with record-high prices, falling nearly 30 per cent from last year, while coins and bars were selling rapidly," stated Surendra Mehta, secretary at the India Bullion and Jewellers Association.

In the Indian market, consumers typically pay an additional 10-20 per cent of the gold price as manufacturing charges for jewellery, making it substantially more expensive than purchasing gold coins.

Local gold prices closed at Rs 127,008 per 10 grams on Friday after reaching a record high of Rs 132,294, representing an increase of more than 60% since last year's Dhanteras. During the same period, India's NSE Nifty 50 share index rose approximately 5 per cent.

Facing unprecedented price increases, the industry is offering substantial discounts on jewellery making charges to maintain strong gold-buying interest throughout the festive and upcoming wedding seasons, explained Sachin Jain, CEO of the World Gold Council's Indian operations.

Indian dealers were quoting a premium of up to $25 per ounce over official domestic prices this week, inclusive of 6% import and 3% sales levies, marking the highest premium in more than a decade.

Meanwhile, demand for silver coins, bars and jewellery was robust this year, driven by the metal's impressive price rally, according to Saurabh Gadgil, chairman of PNG Jewellers. Dealers noted that investors believe silver could potentially outperform gold.

Higher returns from precious metals have attracted significant inflows into physically backed gold and silver exchange-traded funds in recent months.

"With jewellery stores remaining open until midnight and Dhanteras continuing into tomorrow afternoon, we expect the buying momentum to carry forward," said Rokde of GJC.