Dhanteras, the festival considered auspicious for buying gold, was dimmer this year.
Unlike the long queues and crowded showrooms of the last many years, jewellery shops were mostly empty this time.
“Streets are practically deserted and salespeople are sitting idle; this is the among the worst Dhanteras we have ever seen,” Prithviraj Kothari, managing director of RiddiSiddhi Bullions Ltd, said.
He estimated the demand to be down 50% over the last year.
Hasmukh Bafna, another Mumbai-based jeweller said as the demand was down by about 80% during Dusshera they were expecting an uptick now, but there was hardly any significant improvement.
Last year, despite the gold prices being in the range of Rs 31,500/10 gm most jewellers had recorded a 30-50% surge in both volume and value of sales.
This year, however, inflation and weak consumer sentiment have been putting pressure on the consumers, who have been cutting discretionary spend. In fact, as per a ZyFin Research survey, despite the festival season, consumer sentiment in October was at its lowest in the last two years.
Moreover, gold prices had nosedived to around Rs 25,000/10 gm levels earlier this year, prompting many consumers to advanced purchases.
Gold touched a low of Rs 25,130/10 gm in the Mumbai bullion market in June. Currently, the prices are on an upswing, scaling Rs 31,000/ 10 gm levels. Gold closed at Rs 30,510/10 gm in Mumbai on Friday. Also, supply crunch has been pushing gold prices up in the country.
Earlier this year, the government introduced the 80:20 norms, under which 20% of the gold being imported needs to be exported. The import duty on gold, too, has been hiked to 10%.
“Exporting the gold after paying high import duty translates into losses for jewellers. As a result, people are not importing, which is leading to a supply shortage,” said Bafna.
“Gold imports have largely stopped (since July) and this is pushing the premium over the London gold prices in India. While the demand-side is actually weak, it is the supply crunch that is adding to the upside,” a report by Angel Broking said.
With prices so high most consumers have reduced the ticket size or have shifted to silver coins. Consumers with bigger budgets have shifted to either diamond or platinum.
Consumers, too, have become smarter, said Kothari.
“They know prices go up on Dhanteras, so they book the jewellery on a day when they are low and take the delivery on Dhanteras,” he said.