Gold Demand Expected to Increase with Indian Holiday
An important Hindu holiday will take place on Friday, and Indians are expected to celebrate by rushing to buy gold. Akshay Tritiya ranks as one of the four most important days for Hindus. The word Akshay roughly translates to “the never diminishing”. The day is believed to bring good luck and success. It is also considered one of the most auspicious occasions to buy precious metals including gold.
After a jewelers strike last year put a damper on gold sales, gold demand for this years Akshay Tritiya is expected to be unusually high. Managing director of the World Gold Council’s India division, Somasundaram P R, told Business Standard he expects a big rebound this year.
“It was not a real Akshaya Tritiya last year, due to jewelers’ long strike ahead of this festival. While some of the jewelers and artisans came back to work, buying was not encouraging. We see a completely different trend this year. Akshaya Tritiya and the surrounding week have seen a demand increase. After all the troubles of demonetization, sales seem to have come back. From the initial estimates, there seems a strong revival in demand. We wouldn’t be surprised to see the demand twice as much as last year.”
Resolution of the jewelers strike isn’t the only reason for increased demand this year. Political and economic factors are also driving a rush to gold in India – just like they are all over the world.
Indians have faced a cash crisis in recent months after the government suddenly declared that 1,000 and 500 rupee notes would no longer be valid. The 1,000 and 500 rupee notes made up 86% of the currency in circulation in the country. The government demonetization program made virtually all of the cash in India valueless. The move led to severe cash shortages and consumer backlash that continues today.
Worldwide geopolitical tensions have also spurred safe-haven precious metals buying in India, according to RiddiSiddhi Bullions director Prithviraj Kothari.
“At the current level of elevated political tension in North Korea and Syria, gold would continue its haven appeal. History suggests that prices of precious metals rise in case of inflationary pressure and geopolitical tension. In India, the impact of the gold price rise in global markets has been lower due to appreciation in the rupee against the dollar.”
Indians traditionally buy and hold gold. The yellow metal is interwoven into the country’s marriage ceremonies and cultural rites. Indians also value gold as a store of wealth, especially in poor rural regions. Two-thirds of India’s gold demand comes from these areas, where the vast majority of people live outside the official tax system.
While owning precious metals is part of India’s culture, the fundamental reasons Indians buy gold and silver are no different than those that motivate people over the world to invest in precious metals – they historically preserve wealth, they provide a safe haven, and most significantly, they are real money. As Kothari said, “Gold should be a part of everyone’s portfolio.”
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