India’s gold imports reached a 31-month high in October as jewelers increased purchases to meet the surging demand rates from buyers preparing for the festive season ahead. While gold buying typically surges during this time of year in India, this season has shown a particularly high level of imports. Compared to October of last year, this month’s data shows a 61% increase in gold imports.
This high purchase level coming from India, the world’s second-largest gold buyer, could positively influence international gold prices. During October, India imported a whopping 123 tons of gold, compared to 77 tons during the same period last year. On average, India’s monthly gold imports sit at around 66 tons, meaning October’s levels nearly doubled the nation’s typical buying habits.
So why are consumers spiking gold demand so much right now? India’s gold market is experiencing what many would call a perfect storm: low prices just ahead of the festive season.
At the beginning of October, Gold Front Month Continuation (MAUc1) local prices hit a seven-month low, offering buyers the prime opportunity to invest at an affordable price. To make the scenario even more perfect, this price drop came just ahead of India’s top festivity season of the year, when citizens from around the nation purchase the most precious metals all year. Between the low prices and the upcoming festivities, it only makes sense that buyers wanted to purchase gold before performance rates began spiking again.
“Jewellers were operating with lower stocks and were eager to replenish at the reduced price levels observed in October,” a Mumbai-based bullion dealer explained.
In India, buyers typically schedule their precious metals purchases around auspicious dates. Dussehra occurs during October, which is a major Hindu festival where buying gold is auspicious. Just a few weeks later comes Diwali, which is one of the biggest gold-buying holidays of the year in India, spiking demand and purchase rates across the country.
India’s local gold futures soared to a record-high level of 61,914 rupees per 10 grams by November as Diwali came and went, keeping demand rates robust despite the rising prices. Products like gold coins and bars remained high in demand as buyers opted for investment opportunities.
India’s local price surge supported international prices as gold futures climbed above the $2,000-per-ounce line by the end of October, reaching $2,005.60 per ounce on October 30. Gold’s international pricing success in October could be traced back to numerous factors, though, including the rising conflicts in Israel and Palestine and reduced stress over interest rate hikes. Still, the increased demand from retail buyers, like India, ahead of the festive season gave gold a much-needed demand boost.
Looking ahead to November, Amit Modak, the CEO of P.N. Gadgil and Sons, feels positive about gold’s performance in India despite the typical drop-off rates that occur this time of year. Last year, gold imports dropped to 67 tons in November, but Modak suspects that imports will only fall to 80 tons this year, given the increased demand from the upcoming wedding season.
Weddings drive a large portion of India’s gold purchases, as Indians see gold as a symbol of wealth and prosperity. During the wedding season, people buy gold to gift their loved ones with future prosperity. India’s wedding season resumes with more auspicious dates near the end of the year, allowing gold to regain its retail demand.
After the COVID-19 pandemic paused weddings for two years, we’re seeing a resurgence of all the gatherings that couldn’t happen during the restrictions. Because of this, analysts like Modak believe this November will still see high gold import rates from India, given the wedding demand sector.
Regardless of how India’s gold industry performs in the coming months, international gold prices seem to be unstoppable in recent weeks. On November 10, gold futures traded at $1,937.70 per ounce. By November 21, the commodity skyrocketed to $2,021.80 per ounce, just barely below the high point for the year.
With conflicts in the Middle East intensifying as more nations become involved in the Israel-Palestine war, gold has gained regularized safe-haven support from investors wanting to protect their assets. At the same time, most suspect that the Federal Reserve will not raise rates during the last meeting of the year, offering gold some breathing room after nearly a year of hawkish actions from the Fed. According to CME’s FedWatch Tool, the current likelihood of a rate pause in December is 95.5%.
As always, investors should consult their advisors before making any portfolio decisions.