Record gold prices shift Indian festive demand toward coins over jewellery

Soaring gold prices led Indian buyers to choose coins and bars over jewellery during the Dhanteras festival on Saturday, fuelled by hopes that the precious metal's glittering rally would continue, industry officials told Reuters.

Dhanteras, which marks the start of the five-day Diwali festival of lights, is considered auspicious for buying gold and is one of the busiest gold-buying days in the world's second-biggest consumer of the metal. Overall gold sales during Dhanteras were 10–15% lower in volume terms compared to last year, but total value rose sharply due to higher prices, said Rajesh Rokde, chairman of the All India Gem and Jewellery Domestic Council.

"Gold jewellery demand took a hit with record-high prices, dropping nearly 30% from last year, but coins and bars were flying off the shelves," Surendra Mehta, secretary at the India Bullion and Jewellers Association, said. In India, buyers typically pay 10–20% of the gold price as manufacturing charges for jewellery, making it even more expensive than buying gold coins.

Local gold prices closed at 127,008 rupees per 10 grams on Friday after hitting a record high of 132,294 rupees, marking an increase of more than 60% since last year's Dhanteras. India's NSE Nifty 50 share index has risen about 5% during the period. Facing record price surges, the industry is offering healthy discounts on jewellery making to maintain strong gold-buying interest throughout the festive and upcoming wedding seasons, said Sachin Jain, CEO of the World Gold Council's Indian operations.

Indian dealers were this week quoting a premium of up to $25 per ounce over official domestic prices, inclusive of 6% import and 3% sales levies, the highest in more than a decade. Demand for silver coins, bars and jewellery meanwhile was strong this year, driven by the metal's stellar price rally, said Saurabh Gadgil, chairman of PNG Jewellers. Investors believe silver could outperform gold, dealers said.

Higher returns from precious metals have been attracting strong inflows into physically backed gold and silver exchange-traded funds in recent months. "With jewellery stores open till midnight and Dhanteras continuing into tomorrow afternoon, we expect buying momentum to carry forward," said Rokde of GJC.