Unlocking Dhanteras 2023: Discover the Unique Factors Behind India’s Gold Rush This Diwali

As Diwali approaches, Delhi’s Lajpat Nagar is buzzing with activity. Shoppers flock to jewelry stores, drawn in by bright decorations and sparkling displays. Even with gold prices soaring above $1,440 per 10 grams, people aren’t giving up their love for gold.

Festivals like Diwali and Dhanteras are significant for buying gold, considered lucky and auspicious. While high prices have dampened some enthusiasm, many still feel a sense of urgency—what if prices climb even higher? Prakash Pahlajani, a jeweler from Kumar Jewels, noted an interesting trend: even with increasing prices, more customers are visiting his store. “They’re still buying, just less,” he said.

To adapt, jewelers are innovating. Tanishq Gupta, another local jeweler, has designed lighter pieces that look grander but use less gold. He offers smaller coins, like those weighing just 250mg, at affordable prices. This change caters to buyers, especially younger ones, looking for everyday wear rather than just special occasion jewelry.

Interestingly, more customers are investing in gold rather than just purchasing it for jewelry. According to the World Gold Council, the share of gold jewelry in India’s gold demand has dropped from 80% last year to 64% now, while investment demand has risen significantly. Gold exchange-traded funds (ETFs) are also gaining popularity, with a record inflow of assets this year.

India’s central bank influences gold prices as well. Reports indicate that the Reserve Bank of India has increased its gold reserves, making up a significant portion of its foreign exchange holdings. This strategy is aimed at diversifying assets and reducing dependency on the dollar during economic uncertainties.

Despite the high costs, demand for gold is poised to continue, especially during festive periods. Madan Sabnavis, chief economist at Bank of Baroda, remarked that while middle and lower-income families feel the pinch, wealthier classes will keep buying. Some, like Bhavna, getting married soon, are hesitating to buy until prices decrease, showcasing the cautious approach many are taking.

Culture plays a big role here. Tradition dictates that gold is a symbol of wealth and stability in India. Morgan Stanley’s report highlights that Indian households hold an impressive $3.8 trillion in gold—over 88% of the country’s GDP. This long-term investment approach affirms the importance of gold as a safety net amid fluctuating markets.

Ultimately, while soaring prices might trim immediate purchases, the cultural significance of gold seems steadfast, promising that the love for this precious metal will endure even as economic conditions evolve.

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