Gold in India creeps back above world prices at Diwali as traditional sales drop 50%, Amazon reports a boom...

 

DIWALI 2015 has seen gold prices in India – historically the world's largest consumer market for the metal – move back above international quotes for the first time in three months.

 

But demand for precious metals has fallen markedly from the festive season last year, with analysts and retailers blaming weak household incomes and changing consumer tastes.

 

The Hindu "festival of lights" this week marks the peak of Indian's heaviest gold-buying season, traditionally starting after the harvest and gathering pace with the return of "auspicious" days for marriage ceremonies on religious calendars.

 

Starting Monday however with Dhanteras – linked to the Sanskrit word for "wealth" and traditionally observed by buying gold – this week's 5-day festival is expected to see much lower demand from Indian households than recent years after poor monsoon rains led to a weak harvest and lower rural incomes.

 

"There is no hustle and bustle in the market this year," The Times of India quotes one New Delhi shopkeeper. "Diwali is barely two days away and people are not buying anything here. We have stopped anticipating if there will be any good sale this festive season. Even sale of jewellery is low this time."

 

But while traditional jewelers and other shops report poor demand so far this Diwali – as bad as 50% lower from 2014 by some accounts – online retailer Amazon says its gold-item sales have jumped almost 5-fold from a year ago, when the internet giant launched jewelry to Indian web users.

 

Online sales of 22-karat gold items jumped 280% in October from the month before, Amazon says.

 

Furthermore, the Indian government is now promoting domestically-made coins – launched just in time for Diwali – minted by its MMTC joint-venture with Swiss refiner Pamp and sold in 16 cities nationwide through MMTC outlets.

 

Dealer prices have meantime moved back to a premium over international wholesale rates, reports the Platts news and data service, with the rise due to both "higher demand on the back of lower dollar prices, and a further reduction in custom duties for imported gold," according to a refiner in Ahmedabad.

 

This year's repeated discounts have come as a change in import duties gave an advantage to India's domestic refining industry – previously suffering huge over-capacity after heavy investment was first encouraged and then hurt by changes in government import duties.

 

2015 has seen India's refiners take advantage of the lower import duty on unrefined doré – an impure alloy shipping from gold mines abroad, charged at 8% rather than the 10% duty applied to bullion bars coming from overseas processing plants. That has led to a surge in doré imports and so, once it has been refined domestically, a glut of metal for sale in India.

 

But "we can't blame all of [the 2015 price discount] on the doré issue," Bloomberg News quotes investment and bullion-bank HSBC's analyst James Steel in New York.

 

"We’re looking at a wholesale market that's well-supplied and a retail market that's not as strong as many had thought following below-average rainfall."