Gold demand in India is expected to stay strong during the upcoming festive season, thanks to the significant reduction in import duty that has made gold prices more attractive, providing relief to retail consumers and encouraging purchases, according to industry officials.
As the world's second-largest gold consumer, India's higher demand could bolster a surge in global gold prices, which reached a record high last week. However, this increased demand for gold imports could widen India's trade deficit and put pressure on the rupee.
"The primary beneficiaries of the reduced duty cut will be retail consumers," said Sachin Jain, CEO of the World Gold Council's Indian operations. India reduced import duties on gold in July to 6% from 15%, a move intended to combat smuggling.
Demand during the upcoming festival season is expected to be very strong, Jain told Reuters at the India Gold Conference. Gold demand in India typically increases towards the end of the year, coinciding with the traditional wedding season and major festivals like Diwali and Dusherra, when buying gold is considered auspicious.
Retail demand has improved since the duty cut lowered prices, and this trend is likely to continue in the coming months, said Ajoy Chawla, CEO of the Jewellery division at Titan. Global gold prices hit a record high last week, but domestic prices in India were around 71,800 rupees per 10 grams on Monday, below the July record of 74,731 rupees.
The duty cut has altered the sentiment among retail consumers, who were delaying purchases due to rising prices, said Asher O, managing director of India Operations at Malabar Gold and Diamonds. Without the duty cut, gold prices could have reached a new record high above 80,000 rupees, but now they are trading below the peak, which is likely to boost demand from next month's Onam festival, according to Asher.
