As the festival of lights approaches, many Indians are considering gold purchases, a traditional favorite during Diwali. However, buyers face crucial decisions: should they opt for gold jewellery or invest in coins and bars? And how might current market conditions affect their choices? Let's break down the costs, benefits, and market outlook associated with each option to help make an informed decision.

Cost Comparison: Jewellery vs Coins and Bars

When it comes to gold purchases, the cost structure varies significantly between jewellery and coins or bars. Here's a detailed comparison:

Understanding the Cost Implications

Gold Jewellery

Gold jewellery comes with additional making charges, ranging from 5% to 25% of the gold's value. These charges cover the design and crafting costs. On top of this, there's a 3% Goods and Services Tax (GST) applicable. While the initial cost is higher, jewellery offers emotional value for gifting and personal use.

Gold Coins and Bars

In contrast, gold coins and bars typically only incur the 3% GST. Some high-end pieces with intricate designs may have minimal making charges, but these are generally the exception rather than the rule. This makes coins and bars an attractive option for those focused purely on investment.

Investment Considerations

For those prioritizing investment returns, gold coins and bars present a compelling case. With minimal additional costs, they offer:

1. Easier storage
2. Better resale value
3. Lower overall cost of acquisition

However, it's worth noting that the additional costs associated with jewellery may be recovered over time as gold prices rise. This factor, combined with the emotional and aesthetic value of jewellery, may sway some buyers despite the higher initial outlay.

Market Outlook and Potential Price Correction

According to Manoj Jha, Co-Founder of Kamakhya Jewels, gold prices near record highs may face a correction as the metal enters what he considers a bubble zone. Jha expects gold to potentially correct by $300-400 per ounce in the near term. He cites that investors' portfolio allocations have risen from typical 10-12% to 18-22% due to recent price surges, putting gold in an overbought zone.

Jha referenced historical patterns where gold rallies in 1979-80 and 2010-11 were followed by sharp corrections. This potential correction could significantly impact investment decisions and timing of purchases.

Festive Demand Remains Strong

Despite the potential for a price correction, Jha remains optimistic about India's festive demand. He noted that Dhanteras jewellery sales were better than expected with only a 15-20% volume decline despite record prices, while bullion sales rose over 25% year-on-year. This indicates a resilient market even in the face of high prices.

Current Gold Prices

As of the latest data, gold prices in India stand at ₹13,069.00 per gram for 24-karat gold, with global spot gold at $4,253.33 per ounce.

Making the Right Choice

The decision between jewellery and coins or bars ultimately depends on the buyer's priorities:

• For Investment: If the primary goal is to maximize returns and maintain liquidity, gold coins and bars are the more prudent choice. However, investors should be aware of the potential for a price correction in the near term.
• For Tradition and Aesthetics: If emotional significance and the joy of wearing gold are important, jewellery might be the preferred option, despite the higher costs.

As Diwali approaches, buyers should carefully consider their objectives, budget, and long-term plans when making their gold purchases. They should also factor in the current market conditions and the possibility of a price correction. Whether opting for the traditional allure of jewellery or the practical benefits of coins and bars, understanding the cost structures, benefits, and market dynamics of each option is key to making a decision that shines bright long after the festival lights fade.

In a remarkable turn of events in the precious metals market, gold has achieved unprecedented milestones, captivating investors and jewellery enthusiasts alike. This surge comes at a particularly auspicious time, just ahead of Dhanteras, a festival traditionally associated with gold purchases in India.

Gold's Glittering Performance

Gold prices have risen dramatically from Rs 78,840.00 per 10 grams on the previous Dhanteras to approximately Rs 1,28,200.00 currently, representing a 62.61% increase in Indian rupee terms. The precious metal hit multiple all-time highs, with gold futures on MCX reaching Rs 1,32,294.00 per 10 grams and spot gold climbing to $4,378.69 per ounce, marking its biggest weekly gain since December 2008.

Factors Driving the Rally

Several factors have contributed to this extraordinary rally in gold prices:

1. Macroeconomic Uncertainty: Global economic uncertainties have driven a flight-to-safety demand.
2. Geopolitical Tensions: Increasing global tensions have boosted gold's safe-haven appeal.
3. Weakening U.S. Dollar: A softer dollar has made gold more attractive to international buyers.
4. Central Bank Accumulation: Increased gold purchases by central banks worldwide.
5. ETF Inflows: Growing investor interest in gold-backed exchange-traded funds.
6. Federal Reserve Commentary: Dovish statements from the Fed have bolstered precious metal prices.

HSBC's Bullish Forecast

HSBC has increased its 2025 average gold price forecast by $100 to $3,455 per ounce. The bank projects gold could reach $5,000 in 2026, with the rally expected to continue through the first half of 2026. This bullish outlook is driven by:

1. Ongoing geopolitical risks
2. Economic policy uncertainty
3. Rising public debt

HSBC notes that new gold market entrants are likely to remain for diversification and safe-haven purposes rather than just price gains.

Other Market Projections

ANZ forecasts gold will peak near $4,600 per ounce by June 2026 before declining as the Federal Reserve concludes its easing cycle.

Market Dynamics and Performance

Gold has registered over 35 new record highs this year and surged more than 50% year-to-date. The jewellery segment showed mixed results, with lightweight jewellery demand increasing due to high prices and changing consumer preferences. However, overall jewellery demand dropped 17% year-on-year during Q2.

Implications for Investors and Consumers

This surge in gold prices could have significant implications:

1. Dhanteras Purchases: The timing of this rally, coinciding with Dhanteras, might affect buying patterns among Indian consumers, although demand remains strong.
2. Investment Strategies: Investors may need to reassess their portfolio allocations in light of these record-breaking prices.
3. Economic Indicators: The flight to safe-haven assets like gold could be indicative of broader economic uncertainties.

Investor Vijay Kedia's Perspective

Amid the gold rally, prominent investor Vijay Kedia has shared his views on gold investing. As gold reached $4,300.00 per ounce on COMEX and Rs 1,32,294.00 per 10 grams on MCX December futures, Kedia argued that stock investing keeps investors intellectually engaged through innovation and enterprise, contrasting this with gold's long-term price appreciation pattern.

Kedia's portfolio moves reflect this philosophy. He has added positions in Yatharth Hospital & Trauma Care Services and Global Vectra Helicorp while trimming Affordable Robotic & Automation holdings. Notably, Yatharth Hospital has gained 172% since its IPO, while his Global Vectra increase came during a temporary downtrend.

As the precious metals market continues to evolve, investors and consumers alike will be watching closely to see if these record-breaking trends persist or if a correction is on the horizon. The coming days, especially around Dhanteras, will be crucial in determining the short-term trajectory of gold prices, while also considering diverse investment strategies.