India’s festival season Gold demand falls sharply

Mumbai-India (Oct 22)  Demand for Gold in India, the second biggest Gold consumer after China was better than last week but compared with last year’s festival season Dusherra and Diwali, it was as much as 40 percent lower in some parts of country.

 Key festival brought little activity to the physical Gold market in India this week as purchases remained significantly lower than normal with domestic prices jumping to the highest in more than two years.

 Usually the demand for bullion strengthens towards the end of the year during the traditional wedding season and major festivals including Diwali and Dusherra, when bullion buying is considered auspicious.

 In the Indian market, Gold futures hit the highest since July 6, 2016, at Rs 32,311, earlier this week.

 Two-thirds of India’s Gold demand comes from rural areas, where jewellery is a traditional store of wealth. This year, monsoon rainfall was 9 percent below average, denting output of key crops and thereby affecting farmers’ incomes. Jewellers are disappointed with Dusherra demand. If prices remain at the current level, then Diwali demand will also be subdued.

 Traders had offered discounts up to $7 an ounce over official domestic prices this week, the highest since mid-June, compared with the $6 discounts last week. The domestic price includes a 10% import tax.

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