India’s Festive Season Drives Gold Premiums to Decade-High Levels

Gold premiums in India have surged to their highest levels in over ten years due to strong demand linked to the festive season. As of October 17, dealers in India are charging premiums of up to $25 per ounce over official domestic prices. This increase comes as spot gold prices broke through the $4,300 mark for the first time, climbing 7.6% in a week amid escalating U.S.-China trade tensions and predictions of a potential U.S. interest rate cut.

Record Gold Prices and Festive Demand in India

Domestic gold prices in India have reached a historic high of 131,699 rupees per 10 grams. Facing high premiums, Indian dealers have noted a significant rise in investor interest despite weaker jewelry demand. Ashok Jain, a gold wholesaler based in Mumbai, remarked on the impact of the ongoing price rally, which has encouraged purchases, particularly in small denomination coins and bars as preparations for the Dhanteras and Diwali festivals commence.

Impact of Festivals on Gold Buying

• Dhanteras and Diwali: These festivals, occurring later this month, are considered auspicious for gold purchases.
• Gold Smuggling: The record-high prices and supply shortages have led to an increase in gold smuggling into India.

Independent analyst Ross Norman noted that the current market dynamics are surprising. Traditionally, a retail rush for investment gold might indicate an end to a rally, but this cycle seems to defy expectations.

Global Market Trends

In nearby markets, the dynamics surrounding gold are also noteworthy. In China, prices displayed a variation, with discounts ranging from $20 to $66 per ounce compared to the global benchmark. Hugo Pascal, a trader, highlighted a resurgence in Chinese demand for gold. Meanwhile, in Hong Kong, gold sold at prices aligned with spot prices plus a premium of $1.30. Singapore reported fluctuations from a discount of $0.50 to a premium of $1.30, leading to depleting dealer inventories.

Even in Japan, gold maintained a premium of $1 over spot prices, exemplifying the global enthusiasm for the precious metal.

As markets adapt to these fluctuations, Indian consumers and investors remain active, responding to both cultural significance and economic factors influencing gold purchases this festive season.