Gold Price Hits Record High, Dampens Demand in Festive Season

Buoyed by festive demand, gold price in India has touched an all-time high. But at the same time, the high price has adversely impacted the demand outlook for the yellow metal in the world's second-largest market.

This was evident last week-end as it was Akshay Tritiya, considered as one of the most auspicious days for Hindus who have a tradition of buying gold on this day as they believe it brings wealth and prosperity.

According to Chirag Sheth, principal consultant at Metals Focus Ltd, there was a noticeable improvement in purchases over the weekend compared to the past couple of months. While sales were expected to be higher in value compared to the same time last year, they would likely be lower in volume, Sheth added. This increase in purchases can be attributed to Akshay Tritiya, which fell on April 22 this year and extended into the morning of the following day.

The year has seen a significant rise in global gold rates due to turmoil in the banking industry, which has led to increased demand for gold as a safe haven. This surge in demand has driven Indian gold futures to reach a record high in April.

India, being one of the world's largest consumers of jewelry, bars and coins - accounting for over a fifth of global demand, imports the majority of its gold from Switzerland and the UAE. Data from the World Gold Council show that consumption was 774 tonne last year.

Demand during the period from April to June is expected to be weak, resulting in overall sales for this year remaining stagnant or declining compared to 2022, Sheth said. "You already have a washed-out January-March quarter and the current quarter is also weighed down by high prices," he added.

Heatwaves are also hurting demand. While the months of April and May will be busy for sales because of the extended wedding season, extreme heat is a worry "because people generally don't venture out of the house and only visit the stores in the evening," according to Ashish Pethe, former chairman of All India Gem and Jewellery Domestic Council. India is preparing for a potentially hotter summer this year.