The India Bullion & Jewellers Association (IBJA) reports a significant shift in gold sales patterns during this year's Dussehra festival, marked by a volume decline but a substantial increase in overall value.

Key Highlights

• Gold sales volume dropped 25% to 18 tonnes, down from 24 tonnes last year
• Sales value surged 30-35% despite lower volume, driven by steep price increases
• Gold retail prices reached Rs 1.16 lakh per 10 grams, up 48% from Rs 78,000 last year
• High prices led to increased old gold exchanges, now accounting for 50-60% of sales at some jewellers

Price Impact on Consumer Behavior

The dramatic rise in gold prices has significantly influenced consumer purchasing patterns. With retail prices soaring to Rs 1.16 lakh per 10 grams—a 48% increase from the previous year—many consumers have been deterred from making fresh purchases. This price surge has led to a notable trend of increased old gold exchanges, with some jewellers reporting that these exchanges now constitute 50-60% of their sales.

Investment Demand Remains Strong

Despite the overall volume decline, investment demand for gold and silver coins has remained robust. Jewellers report strong sales for 5-gram gold coins and 20-gram silver coins, indicating that investors are still keen on precious metals as a store of value.

Future Outlook and Consumer Strategies

Looking ahead to the upcoming festive and wedding seasons, jewellers are observing an interesting trend. Consumers are placing advance orders for Dhanteras and Diwali, with many opting to purchase gold bars for future conversion into jewellery. This strategy allows buyers to secure gold at current prices while deferring manufacturing costs.

Regional Variations

The gold market is experiencing notable regional differences:

• Central India: Encouraging demand reported
• South India: Jewellers noted lower sales during the festive season

Market Implications

This year's Dussehra gold sales data presents a complex picture of the Indian gold market. While the volume decrease might be concerning for some, the significant value growth underscores the enduring appeal of gold as both an investment and a cultural staple. The shift towards old gold exchanges and strategic buying of gold bars suggests that consumers are adapting to the high-price environment, finding new ways to participate in the gold market while managing costs.

As the industry moves towards Dhanteras, Diwali, and the wedding season, all eyes will be on whether these trends continue and how they might shape the broader precious metals market in India.

Market Overview

Gold December futures on MCX opened lower by Rs 722 (0.61%) at Rs 116866.00 per 10 grams after hitting record highs for three consecutive sessions. Silver December futures declined more sharply by Rs 2220 (1.5%) to Rs 142500.00 per kg.

Internationally, spot gold held steady at $3851.99 per ounce after reaching an all-time high of $3896.49. Bullion is up 2.4% for the week and positioned for a seventh straight weekly gain.

Factors Influencing Gold Prices

U.S. Government Shutdown

The U.S. government shutdown entered its second day, potentially delaying key economic data including non-farm payrolls.

Interest Rate Expectations

Traders are pricing in a near-certain 25 basis-point U.S. rate cut this month.

Market Projections

Market analysts expect continued volatility ahead of employment data, with gold projected to trade between $3820.00-3920.00 per ounce and silver between $45.50-47.40 per ounce.

Long-Term Outlook

Despite short-term profit-taking, experts suggest long-term fundamentals remain intact, recommending a buy-on-dips strategy.

Factors Contributing to Gold's Performance

1. Increased buying activity from central banks worldwide has bolstered demand for gold.
2. Exchange-traded funds (ETFs) backed by gold have seen growing interest, reflecting heightened investor appetite for the precious metal.
3. Expectations of potential interest rate cuts by the U.S. Federal Reserve have further fueled gold's appeal.

Conclusion

While the immediate price action shows a retreat, the overall trend for gold remains positive. Investors and analysts will be closely watching how geopolitical events, inflation data, and central bank policies might influence gold prices in the coming months.