NEW DELHI — Plunging gold prices have prompted a rush to buy gold in India, the world’s most voracious consumer of the yellow metal. The drop in prices will also help the government, whose finances have been strained by the high cost of gold imports.
Madhu Walia has been looking closely at a range of gold bangles and chains at one of New Delhi’s largest retailers for precious jewelry. “Prices have fallen, so I am very much interested to buy," said Walia. "But design I have not liked.”
Amid the sharpest drop in gold prices in three decades on Monday, consumers started flocking to jewelry shops. Indians have a centuries-long cultural affinity to gold. Jewelry is gifted to brides on marriages and bought on auspicious occasions such as festivals. However, a five-fold increase in gold prices in the last decade had dimmed the precious metal's allure.
Now, the nearly 20 percent plunge in prices since the start of the year has reignited India’s passion for gold. And, jewelers are upbeat. Sanjeev Agarwal heads the export division of Gitanjali Gems, one of India’s biggest jewelry chains. He says the drop in prices has come just weeks ahead of the “Akshaya Tritya” festival, May 13, considered by Hindus an auspicious day to buy gold.
“Definitely, definitely, [there is] significant increase in footfalls [customers] and enquiries and purchases. It has the benefit of the festival coming next month and also the fact that wedding season is on, so it adds to the quantum of purchases being done.” said Agarwal.
There is also increased interest in the wholesale gold market in New Delhi, where traders are clinching more deals than in the past few years. The head of the Delhi Bullion and Jewelers Welfare Association, Vimal Kumar Goyal says orders from retailers have nearly doubled since prices tumbled.
He says people are getting nearly 20 percent more gold compared to what they would have received in their budget, compared to the start of the year. That has enthused customers.
Although business has been brisk in recent days, jewelers expect it to become even more so in the weeks to come. They say many customers are waiting to watch if prices drop further. They are people like Shipra Chabbra, who has come with her mother to a jewelry shop. “The anticipation is there will be more falling tomorrow or this week, so we are holding on, but that does help the decision, because you tend to save a bit more,” she stated.
No benefit for government
However, while jewelers may benefit from India’s affinity for gold, the government does not. Massive gold imports have strained government finances and prompted several policy measures to moderate gold demand in a country that imports almost all its requirement. Gold imports added up to a record $60 billion in the last fiscal year. That hefty bill has contributed to a worrying trade deficit.
Indian gold imports have been declining. They plunged by nearly 25 percent in the first three months this year.