Indian Gold Rates Declining, Should You Buy Ahead Of Festive Season?

Amid the pandemic-induced slowdown in India, household's privately held gold was worth more than $1.5 trillion at the initial stage of this year. The yellow metal has gained popularity among Indian citizens because of its auspicious factor and also as a hedge against inflation. Ahead of the upcoming festival season, investors are quite concerned about buying gold; as there are worries about the rallying gold rates in the international market at present. In upcoming November, within less than 2 months, Indians will celebrate Dhanteras which is the biggest festive season for the Indian gold market. Additionally, the wedding season - a significant gold business time too, is knocking at the door. So, here is a price chart to help investors who are looking out for previous gold rates of this year to understand the correct time to buy gold.

How far the gold prices fell?

In September, gold rates are down by 13% over the last quarter. Since May 15, this year the gold rates started to rally up again, slowly. In the recent period, gold rates went to their peak during the first week of June, due to worsening global economic conditions. But after that, gold prices have shown consistent fall; only in the second half of July gained to some extend. If counted from May, this year, gold rates have augmented by around Rs. 1100 in September. For big investors, this rally will matter. But if counted from June, the prices have fallen by Rs. 1680 in September, motivating people to buy more gold. Here is a chart of gold rates in India for the last 5 months, that will provide a clear idea of monthly gold prices.

5 months' gold price chart in India

Source: GoodReturns.in Gold Rates

To note, the August gold rates were far down because the US non-farm-payroll data came out with promising figures triggering the anticipation of early tapering. But the US Fed's Chairman Jerome Powell sounded dovish even after that and hinted at delayed tapering, which helped the gold prices to gain. As asset buying will decline, it will drag down gold rates again. Gold is a dollar-dominated asset class and its international prices depend on US Fed's decision and the US dollar index.

However, in January, this year 10 grams 22 carat gold was quoted very high at Rs. 48,460 and 24 carat gold was quoted at a high of Rs. 49,460 in India. But the present declining trend is not indicating gold rates to reach that high again any time soon. If the US Fed starts tapering end of this year, the rates are expected to drop again. So, that will be a good time for Indians to buy gold. The price of the yellow metal is always measured in a long term, like 5-8 years. The monthly gain and falls are influenced by multiple global economic factors, but yearly gold has given good returns to investors, making it a good time.

PR Somasundaram, Regional CEO, World Gold Council in an interview to India today recently said that - in 2019, the gold rates were moving around Rs. 30,000 - Rs. 32,000, but in 2021, the gold rates are being counted at around Rs. 50,000 with GST. Nobody's income has gone that much up. Pointing out his tone, this year Indians are far more cautious about gold price ups and downs and trying to find out when the prices will drop.

Ahead of this festive season gold investors are tracking the gold rates rally in the international and domestic markets to interpret what would be a good time to buy gold. This year there is a doubt about the usual up-trend ahead of the festive and wedding season. As the gold rates are anticipated to drop again with US tapering, small-scale investors can take a policy of wait and watch. There will be a risk although - if the US does not start tapering, the gold prices will go up again. As the gold prices are mostly showing a downward trend, so it now is suggested to invest. When the gold rates will be up again in the next year, the stored gold will be a profitable asset then. However, people who are looking for wedding jewelleries for the October-November season, and can not wait till December, can buy gold now. The prices are low and jewellers are going to provide offers soon.

Here is a gold price chart of major Indian cities on September, 9

Irrespective of the city you are buying gold from, it should be remembered that one must invest in hallmarked jewelleries; the union government is strongly promoting hallmarking system for assured buying now.

Dhanteras is an auspicious Hindu festival, but as the jewellers offer good discounts on making charges at that time, investors across religions and communities try to buy gold at that time. Hence, the household gold storage increases, but this massive wealth mostly lies idle. RBI's gold monetization scheme is an excellent opportunity to explore by people, who are interested to buy the precious metal but would not use the jewelleries on a regular basis. RBI will store the gold safely and will give returns.