Indian Festive Season And The Gold Market

The deep relationship between India and gold goes way back and emerges as unparalleled all over the world. With the festive season already here, the demand for the precious yellow metal is only going to go up. However, a news report suggests that the gold-supplying banks have cut back shipments to India ahead of major festivals in favour of targeting China, Turkey, and other markets where better premiums are being offered.

Industry experts suggest that this pushback might create a scarcity degree in the world's second-biggest market for gold. This might further the Indian buyers into paying heavy premiums for supplies in the upcoming peak-demand season. Usually, ICBC Standard Bank, JPMorgan and Standard Chartered are some of the leading gold suppliers to India, who import gold in surplus, ahead of festivals and store it in vaults. Reports suggest that the vaults are holding approximately less than 10 per cent of gold, as compared to the previous year. The month of September recorded Indian gold imports to have fallen 30 per cent as compared to the previous year to reach 68 tonnes. Meanwhile, Turkish gold imports have increased to 543 per cent. Simultaneously, the net gold imports of China have surged nearly 40 per cent and reached a four-year high in August this year.

The Indian premiums as compared to the international gold price benchmark have come down to 1-2 dollars an ounce. This was 4 dollars in the previous year, around the same time. This has happened because of a now-closed loophole which led some Indian traders to import gold as lower-tariff platinum alloys, thus allowing some to even offer gold at a discount. However, the contrast in the gold premiums is exceedingly high with 20–45-dollar premiums being offered in China, which is also being aided by improving consumer trends after the pandemic. 80-dollar premiums are being offered in Turkey, where gold imports have also surged due to inflation.

Dr. Saurabh Gadgil, Chairman and Managing Director, PNG Jewellers told BW, “Gold prices were expected to see a little correction basis of an increase in US FED rates. An increase in FED rates is directly proportional to a correction in gold prices. We have also seen a lot of geopolitical tension over the last one year, which has led to the shock of gold price correction being absorbed, however, the increase in FED rates has led to a scenario where gold has seen considerable price pressures and temporarily gold prices will remain soft over the next couple of months.”

He also added that November will bring with it the Indian Wedding Season, followed by Christmas in the USA. This would lead to gold prices rallying upwards, yet again. This would further lead to increased consumption and investment demand for gold, thus leading to an increase in prices. Short-term price corrections are always a good time for people to enter the market especially when geo-political pressures are expected to remain the same or worsen. The fundamentals of gold will remain the same and hence it is a must-have in every single person’s investment portfolio.

India is a price-sensitive market, and one sees an upsurge in demand for gold every single time there is a correction. Indian consumption patterns are high every single time prices come down. More consumption and more investments are evident in jewellery sales at the moment. “Diwali this year is expected to be a bumper Diwali, followed by a long wedding season with lakhs of marriages happening across the country during November and December. There is a lot of pent-up demand of the last two years. Prices staying below Rs. 50,000 will further fuel demand,” added Gadgil.

A major shift in consumer behaviour is that gold customers have a long-term vision towards making a particular purchase. The love for discounts has been replaced by after-sales services, warranties, brand policies and brand legacy and meaningful communication. People have also realized the importance of not postponing their purchases because life has become unpredictable. They want to celebrate every occasion. Gadgil stated that people have learnt to value life, appreciate the good things and want to pursue their dreams without postponement.

The pandemic spurred the digital transformation of the industry across the globe. Brands became digital-first, adapted technology at a furious pace and customers became more online shopping friendly. Today what works is a hybrid model, which allows customers to go through a brand’s inventory and then reach the store for a proper jewellery-buying experience. Hence, online browsing and offline shopping is the new way of jewellery shopping. This allows them to make a finer selection, fulfil their jewellery needs better and reduce their time at the store. Shopping offline is also back to the pre-pandemic era. “Our stores saw serpentine queues earlier this year on Akshay Tritiya, which shows that people want to have a proper jewellery shopping experience in store. Therefore, brands cannot move away from offline or online. Brands must continue to make the entire customer journey seamless to ensure customer delight,” Gadgil emphasised.

The Indian market stands poised to benefit greatly from the growth in the digital marketing space. India as a market is one of the largest digital consumer markets in the world. Cheap data, smartphone usage, digital payments, the adaptation of new technologies, OTT platforms etc. have spurred digital consumption and online shopping. Today, e-commerce allows brands to reach customers across the nooks and corners globally. India will greatly benefit from strong e-commerce services, and strong infrastructure in logistics to support e-commerce operations. Gadgil stated that digital is here to stay. The Government of India is also fully focused on creating a seamless digital ecosystem and this will greatly benefit brands and customers alike.

“Online shopping will never replace physical method of shopping. Both platforms of sale will be complimentary to each other. We believe there is a market for both in the jewellery category. Online will be a tool used to enhance the physical shopping experience,” Gadgil added.

Cheaper products, semi-fine jewellery, small ticket-size products, and bullion-like coins and bars will find a lot of traction in online shopping. Expensive fine jewellery, which caters to investment needs, bridal jewellery and festive jewellery will continue to happen in the store, as per the experts.

Jewellery is about touch and feel, it is about the entire experience of seeing jewellery on the potential buyer’s self, it is also about getting assertive feedback from your loved ones when you shop. Online can help shape a customer’s decisions but the pride of purchase hits the spot in the store.