Gold soars to a new high in India as wedding season gets underway

India is expecting thousands of weddings during this wedding season and gold jewelry sales in the area are expected to rise. Gold has recently touched the all-time high in rupees. India is the world's biggest buyer of gold especially during the wedding season.

Author: Shivom Seth
Posted: Tuesday , 15 Nov 2011


Gold touched a new all-time high in India in Rupee terms, although not in dollars as the rupee has fallen back sharply against the Greenback. converting to US dollars the price rose $0.59 to $578.60 per 10 grams, driven by heavy purchases across the country for the ongoing marriage season. Silver followed suit and gained $2.96 to $1,145 per kilo given the increased offtake by industrial units and jewellery retailers.

India is the world's biggest buyer of bullion and traders insist the country's wedding and festival season has boosted prices every year since 2002. India's wedding season runs from late September to December. Over the past decade, gold has risen by an average of 10.2% from September through to December, said traders.

In a report, the World Gold Council noted that 10 million marriages take place in India every year on average. Traders expect the ongoing wedding season in the country to help maintain demand for the precious metal.

"Demand for such occasions, especially from the bride's house, accounts for a substantial proportion of the overall jewellery demand in the country at this time,'' said bullion retailer Wasimbhai Kher.

"Despite the all time high price, weddings are a saving grace,'' he added, ``since most Indians are forced to buy smaller denomination coins and ornaments for gifting purposes. Nothing holds more value in an Indian household than gold. This is more true during marriage season.''

With wedding traditions at their height in India, gold appears to have entered its best season. Most families of Indian brides continue to pay a fortune to outfit them with extensive gold jewellery. Though much of this is in the form of intricate 22-carat gold jewellery that the bride can wear on the most important day of her life, a lot of it is by way of gifting, to relatives and to near and dear ones.

Even as the precious metal becomes a beautiful adornment, its intrinsic value is said to help secure the bride's financial independence within her husband's family. And with wedding traditions in India getting more elaborate and fascinating with each year, traders insist the demand for gold will attain greater heights despite its high price.

Price rules

India is the world's number one consumer of gold. When the price of gold rises, demand is significantly down, said traders, with some investors keen on monetising the gold they have reserved earlier rather than buying new gold.

Gold in global markets, which normally sets the price on the domestic front, gained 0.4% to $1,796.27 an ounce in Singapore on Monday. On the domestic front, gold sovereigns held steady at $460.35 per piece of eight grams in limited deals, traders said.

Political uncertainty on the global stage has also had its effect on the price of the precious metal. ``The economic crisis of Greece has provoked the rise in the price of gold,'' said B Girirajan, gold retailer. ``Investors in India will not buy at this time given the ever high price, but since it is the wedding season, offtake has been witnessed in most retail outlets,'' he added.

Among the various asset classes, gold has probably been the most secure one. "Investments in gold has yielded consistent and assured returns, but at this high price most consumers will stay away,'' said Shantijumer Shah, bullion retailer. He too attributed the spike in price to the happenings in the global financial markets and the European economy.

However, Pranav Mer, commodities analyst at broking firm Mangal Keshav said the long term picture for gold certainly looked positive ``with every dip seen as a buying opportunity to accumulate, with ongoing uncertainty in the global market in terms of macro-economic fundamentals and debt issues.''

"Gold has been the best performer among all the asset classes with positive quarter on quarter returns post the 2008 crisis and has rallied more than 10% in the current quarter so far,'' Mer added.

On Tuesday at noon, the MCX gold December contract was trading flat at $571.59, or 0.08%. It touched an intraday high of $573.80 and an intraday low of $570.02. Some 7096 contracts were traded early Tuesday.

Analysts however contend that over the past many days, the bullion market has been trying to cope with acute volatility and the trend is likely to continue. With uncertainty over European economic conditions continuing, Reena Walia, research analyst at Angel Broking feels that this could be a very supportive factor for gold prices in the near term.

Many analysts are of the opinion that gold is expected to perform best among commodities next year and may rally to a record level as investors seek to safeguard their wealth against slowing economic growth. It has gone beyond the 2012 target for bullion by 35% to $2,200 an ounce. According to many analysts, gold will continue to extend its rally next year as Europe struggles through the debt crisis.

According to bullion retailer Varshiya Bamalwa, the high gold price during the festive season of Diwali has led to a 10% to 15% fall in volumes. However, jewellers and retailers said the fall in ornaments volumes was offset by a similar increase (10% to 15%) in coin and bar sales.

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