Indian Wedding Season: How it Affects the Gold Price
Demand for gold has been driven by emotional, cultural and financial factors for generations, with India being one of the major consumers of this precious metal. According to a World Gold Council report, Indian purchases of gold jewellery in the first quarter of 2017 accounted for a little over a fifth of the world jewellery demand.
India’s demand for gold generally exceeds 514 tonnes per year; and a major reason why Indians rule the market for gold is that it is considered the best way of preserving wealth. Not only is it used to secure riches, it is also used as protection against rainy days. An analysis of gold purchase trends in India reveals that while gold continues to be in demand throughout the year, the demand peaks during the period beginning October and remains strong till February.
This strong demand during specific months is attributable to the Indian wedding season. Let’s find out more about this.
Indian Weddings and the Importance of Gold
Indian weddings are quite a lavish affair, with grand celebrations that last several days and lot of fun. An integral part of wedding shopping in the country is shopping for gold jewellery for the bride, bridegroom and other family members. A key reason why gold shopping is a must is that it is believed to bring good fortune, since it signifies the blessings of Goddess Lakshmi. No matter how rich or poor a family is, they buy gold according to their ability to gift to their daughters and daughters-in-law.
It is also believed that the bride’s beauty is enhanced by the gold ornaments she wears. Jewellery made of gold is gifted to the bride and the bridegroom to ensure that their future life is financially secure. The fact that nearly 20 million weddings take place in India every year points to the massive demand for the metal and its resultant impact on gold prices across the globe.
Gold Imports and Prices
India imports a majority of its gold requirements and so an increase in demand from this country often leads to higher prices. Indian gold imports surged 67% in 2017 to 855 tonnes, leading to an increase in the spot gold prices.
Although global prices for the metal may change due to several factors, including global supply, higher demand from India does boost international prices too. While gold prices go up and down all the time, trends show that it peaks during the Indian wedding season. According to a 2016 report in the Street, Moore Research Centre pointed out that over the last 15 years, traders buying gold on or around September 15 and selling around October 8 would have been profitable around 80% of the times.
Other Factors Driving Gold Prices
Although gold demand fueled by Indian weddings is a primary factor driving gold prices, several other factors, including the rates of interest on financial instruments, bank deposits and global supply drive the price of the precious metal.
- Gold is considered to be a very safe investment, especially during times of inflation. Increased demand for gold during times of inflation leads to a rise in the price for the metal.
- Gold prices are also impacted by the level of gold reserves held by a country’s central bank.
- Increase in interest rates may encourage people to sell their gold holdings and put it to better use. Similarly, a low rate of interest means more cash in the hands of the people and increased demand for gold.
While the Indian wedding season is a key period boosting demand for gold and its prices, several other factors also play an important role. This is why it is important to remain updated with all these factors if you are speculating in the precious metal.
Disclaimer
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