Traditional practices like keeping shops open till midnight on Dhanteras has seemed to have little impact for jewellers as disposable incomes remained tight, despite some pre-ordering bolstering sales.
The festival of Dhanteras is considered to be auspicious for buying gold, jewellery, cars and large appliances. However, in the run up to Diwali 2020, big ticket gold purchases from retail consumers have all been absent from the market.
Bloomberg reported that a day ahead of Diwali, shopkeepers dealing in gold ornaments were seen less busy, as higher prices, the impact of the coronavirus on incomes and fears of the pandemic kept most customers away. Traditional practices like keeping shops open till midnight on Dhanteras has seemed to have little impact for jewellers as disposable incomes remained tight, despite some pre-ordering bolstering sales.
Investors have flocked to gold during the COVID-19 pandemic, leading to a spike in prices including a record high in August. Meanwhile, a strict nationwide lockdown imposed by Prime Minister Narendra Modi's government from late March had compounded jewellers' suffering, even as they were looking to recover from a mediocre 2019 when the country faced an economic slump and demand was sluggish.
Sales have been only 65-70 percent of the previous year's, below the target of 80 percent that was expected, said All India Gem and Jewellery Domestic Council Chairman N Anantha Padmanaban. But with two months of the year written off due to lockdowns, dealers will take what they get in the festival season, he told Bloomberg.
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Even in this moderate spurt and with increased footfall as coronavirus cases recede, the absolute weight of gold bought has declined due to the inflated prices. Conversely, the value of purchases has been high since gold has appreciated 32 percent from the previous Diwali, the report quoted shop-owners as saying.
Secondary cities sustaining gold demand
Secondary urban centres, the Tier 2 and Tier 3 cities, have been sustaining demand in the absence of metros, the report said. Rural economies tied to agriculture have not been affected as badly by the pandemic, and oftentimes their less congested nature has come as a boon in keeping infection numbers lower.
"Initially, we were scared to step out because of the virus and crowds. Since Dhanteras is an auspicious moment and I wanted to buy something for my mother, I arrived at this," 25-year-old Bengaluru techie Karuna Kumari, who is working from home in Ranchi, told Moneycontrol while gesturing to a new jewellery set.Gold buying may fall to a 12-year-low in the festival-season quarter of October to December, the report said, quoting an estimate from Metals Focus. Key to the recovery is job recovery and disposable incomes stabilising for households across the country, along with the COVID-19 caseload continuing to diminish in the oncoming winter.