(Bloomberg) -- Gold prices in India have soared to the highest ever, damping the outlook for demand in the world's second-biggest consumer.
That was especially apparent during the day of Akshaya Tritiya at the weekend, which is considered one of the most auspicious times of the year to buy gold by the nation's majority Hindu population.
“Purchases were obviously improved” at the weekend compared with the past couple of months, said Chirag Sheth, principal consultant at Metals Focus Ltd. But while sales were likely higher in value than at the same time last year, they would be lower in volume, Sheth said. Akshaya Tritiya fell on April 22 this year and extended into the morning of the following day.
Global gold prices have surged this year as turmoil in the banking industry spurred demand for a haven, helping send futures in India to a record in April. The country accounts for more than a fifth of world demand for jewelry, bars and coins, and imports almost all of that, mainly from Switzerland and the UAE.
Unless domestic prices drop by 5-10%, demand from April to June will be weak and overall sales this year will be flat to negative compared with 2022, Sheth said. “You already have a washed-out January-March quarter and the current quarter is also weighed down by high prices,” he said. Consumption was 774 tons last year, according to World Gold Council data.
Gold Near Record in India Means Buyers Are Seen Staying Away
Heat waves are also hurting demand. While the months of April and May will be busy for sales because of the extended wedding season, extreme heat is a worry “because people generally don't venture out of the house and only visit the stores in the evening,” according to Ashish Pethe, a jeweler and former chairman of the All India Gem and Jewellery Domestic Council. India is bracing for what might be a hotter summer than usual this year.
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