As we enter October, gold approaches its largest demand season of the year in Asia, which extends for five months straight, celebrating festivities across numerous cultures. Gold’s biggest consumer countries will soon be entering their gold-buying frenzies, pushing prices up for the shiny precious metal. Key markets in China and India are already taking advantage of the lull in gold pricing.
September started the return of the Hindu wedding season, with ‘auspicious’ dates for weddings re-appearing on the Hindu calendar after the pause during summer. This event marks just the first of many, though.
Dhanteras, also known as Dhanatrayodashi, will come on November 10, marking the first day of Diwali in India. The primary observance for Diwali is buying precious metals. November will kick off India’s top gold-buying festival of the year.
Moving over to the Western Hemisphere and the Middle East, December will bring Christmas, Hanukkah, and Kwanzaa, where families will share gifts of all sorts, including jewelry. While Israel may not contribute a ton to international gold prices, U.S. retail demand levels during the month may impact the precious metal’s performance rates.
After the Western New Year, at the end of December, comes the Lunar New Year, beginning on February 10, 2024. Also called the Spring Festival in China, the Lunar New Year is a 15-day festival involving decorations, firecrackers, dragon dances, and, of course, shopping. Based on tradition, many buy gold during the new year as gifts for loved ones to bring them good luck in the coming year because gold offers a status symbol for supremacy.
In total, the festive period for buying gold will run from October through March, offering five months of higher gold demand rates. Based on data from Metals Focus, over the past 10 years, consumers in India and China have purchased an average of 8% more gold during this five-month span compared to the months of April through September.
When you exclude outlying years, like 2013, when gold prices crashed so consumers jumped on the opportunity and purchased record levels of precious metals, and 2020, when the COVID-19 pandemic plummeted demand for extravagant purchases, like gold, the extra demand during peak season rises by a whopping 15%.
Gold has averaged prices above $1,800 per ounce in each April through September (Q2 to Q3) period since 2020. During this year’s mid-season, however, global bullion excelled, hitting an average of $1,950 and diminishing China and India’s pre-season demand levels that typically arise from low prices. Without this quiet summer lull, the 2023 holiday season may be a bit unpredictable.
On the bright side, global prices for gold in October have already fallen since their high, giving consumers a chance to buy their celebratory gifts at a decent price. Trading prices have fallen by more than $100 per ounce compared to last Friday’s level after Western bond prices crashed, signifying potentially higher interest rates for longer.
“Many consumers are frantically buying gold,” China’s National Business Daily explained while stating that the “gold buying craze” ahead of the upcoming holidays “has not fallen but risen,” according to consumers.
Prices for physical gold in Shanghai skyrocketed by a record-breaking $120 per ounce above global prices recorded in London during the import restrictions placed by China in September, with retail and investment demand “running unstoppably hot,” according to the Henan News Channel.
The rupee rate for gold in India is currently a $5 premium per ounce over the price of imported bullion, including the hefty 18% in duty and tax. According to Reuters, this massive percentage is to thank for India’s new inflows, making it the number-two gold consumer in the last 17 months with excellent demand rates amid low global costs.
“Retail and wholesale demand is improving because of the price correction,” a Mumbai gold dealer explained. “We have been witnessing good traction in the last few days.”
The same traction is happening in China as well. “There are now a lot of people buying investment gold bars,” a gold store salesman explained during the Golden Week holidays, “because the price has dropped a lot.”
India’s monsoon season fell a bit short this year, which could result in a lower crop output. Metals Focus believes the rainfall is “unlikely to impact crop output, which bodes well for India’s precious metals demand, particularly jewelry consumption, as a large portion of this is concentrated in rural India.”
Both nations seem to be entering the holiday season in a positive purchasing environment. As always, investors should consult their financial advisors before making any portfolio decisions.