Are Indians Buying Less Gold This Diwali? Demand Set to Hit 4-Year Low!

Record Prices and Changing Buying Habits Impact Festive Purchases

India, the world’s second-largest consumer of gold, is expected to see its gold demand drop to between 700 and 750 metric tons in 2024, marking the lowest levels since 2020. This forecast comes from the World Gold Council (WGC) and indicates a decrease from last year's consumption of 761 tons. According to Sachin Jain, CEO of WGC's Indian operations, rising gold prices have contributed to this anticipated decline.

Impact of Rising Prices
Traditionally, gold purchases surge in India during the latter part of the year due to significant festivals and weddings, particularly around Diwali and Dussehra, when buying gold is seen as auspicious. However, this year, many consumers have brought forward their purchases to August, prompted by a drop in local prices following a 9 percentage point reduction in the import duty in July. Jain noted that many buyers are now hesitant, waiting for prices to stabilize before making additional purchases, leading to a lower volume of demand during the peak festival season.

Price Trends and Consumption Data
As of late October 2024, domestic gold prices reached a staggering Rs 79,700 ($947) per 10 grams, reflecting a 26 percent increase this year, following a rise of over 10 percent in 2023. Despite the overall decline in projected demand, the WGC reported an 18 percent increase in Indian gold consumption for the July-September quarter, totaling 248.3 tons. This increase is attributed to a 41 percent surge in investment demand and a 10 percent rise in jewelry demand.

Shift to Gold ETFs
Additionally, India's physically backed gold exchange-traded funds (ETFs) experienced their sixth consecutive month of inflows in September, with holdings rising from 43.3 tons in January to 52.6 tons now, reflecting shifting investment patterns amid stock market fluctuations