Indians spend up to $11 billion on gold this Diwali
Gold prices were flat in Asian trading on Wednesday as investors avoided making large investments ahead of the US Federal Reserve’s policy decision and closely followed developments surrounding the Israel-Iran conflict.
Anindito Mukherjee | Bloomberg | Getty Images
The narrow streets of Zaveri Bazaar, one of the oldest jewelery markets in India’s financial capital Mumbai, became even more crowded this Diwali as crowds jostled to buy gold on the auspicious first day of the festival of lights.
But there was a change.
Mahavir Kothari, a precious metals wholesaler at Zaveri Bazaar, told CNBC that most of the people crowding the market are there to buy gold coins or bars, not jewelry.
India’s leading gem and jewelery traders told CNBC that more than 40 tonnes of gold was sold in the country on October 19, the first day of Diwali.
About 700 billion rupees ($8 billion) to 1 trillion rupees ($11 billion) worth of gold were sold during the five-day festival, which ended on Thursday, according to the Indian Bullion and Jewelery Association (IBJA) and the All India Gems and Jewelery Domestic Council (GJC).
Ajay Chawla, CEO of Tanishq, one of India’s largest jewelery chains. reportedly He warned that his company may run out of gold and bullion due to demand during the festive season.
IBJA National Secretary Surendra Mehta said that a few years ago only one in 10 customers preferred coins or gold bars but this is slowly changing. He added that jewelery sales have fallen by nearly 30% this festive season compared to last year, according to his trade body’s estimates.
Indians’ enthusiasm for buying gold for investment stems from their search for returns. Gold rose 66% in mid-October this year before falling sharply; As of Monday, it was still up 55%. Earlier this month, gold prices surpassed $4,000 per ounce, and some industry experts predict the yellow metal will reach $5,000 in 2026.
According to data from the World Gold Council, India is the second largest gold buyer after China. This data shows that the country has been a stable buyer for years due to the traditional demand for gold during the festive (October) and wedding seasons (October-mid-January and April-May).
Gold jewelery in a store in Kolkata, India.
Sonali Pal Chaudhury | Nurfoto | Getty Images
As global central banks increase their purchases of gold, causing a rise in prices, the yellow metal is increasingly attracting retail investors who are afraid of missing out on the rise.
In its report dated September 30, Goldman Sachs stated that central banks, especially in emerging markets, have increased their gold purchases approximately fivefold since 2022, when Russia froze its foreign exchange reserves following the invasion of Ukraine.
“We view this as a structural shift in reserve management behavior and do not expect a reversal in the near term,” the report said.
These sharp rises in gold prices have made Indians view gold not just as a consumer product but also as an important investment asset, experts said.
Anindya Banerjee, head of commodity and foreign exchange markets at Kotak Securities, had earlier said that gold demand is largely driven by consumption and that consumers will cut back on their spending when jewelery prices rise. However, rising prices have not reduced the overall demand for gold this festive season.
GJC chairman Rajesh Rokde said volumetric sales across all five days of Diwali were only about 5% lower than last year despite significantly higher prices.
Gold is currently trading at $4,073 per ounce.
“India’s household wealth held in gold is estimated at $3.8 trillion/88.8% of GDP,” Morgan Stanley said in an Oct. 9 report. “This provides a positive wealth effect even if benign macro stability ensures that gold demand flows remain within a certain range.”
Mukesh Jindal, senior partner at asset management firm Alpha Capital, which manages assets of over 100 billion rupees for family offices and high-net-worth individuals in India, said gold is a good hedge against a fall in the rupee and any weakness in Indian equity markets.
Investments include buying gold bars, coins, exchange-traded funds, and even digital gold. According to data from the Association of Mutual Funds in India, inflows into gold ETFs in September increased more than six times (Rs 83.63 billion) compared to the previous year.
The rise in gold is likely to continue as central banks around the world continue to be net buyers of the metal month over month, Jindal said, adding that he advises clients to allocate 5% to 10% of their portfolios to gold. That’s still a conservative figure compared to Bridgewater Associates founder and billionaire Ray Dalio’s recommendation earlier this month to allocate 15% of his portfolio to gold.
