Mumbai: Fewer auspicious days later this year compelled Ramesh Phalke, an auto company employee in Maharashtra, to hold his daughter's wedding in May. This bride was lucky because many other weddings will likely be postponed - to the dismay of the country's jewellers. Gold is an essential part of the bride's dowry in India and also a popular gift from family and guests at weddings. In fact, Kerala uses up to 400 grams of gold per wedding, or 80 tonnes each year - which is about 10 per cent of the country's total consumption in 2014. Weddings are one of the biggest drivers of gold purchases in the world's top consumer. But this year the contribution could be smaller as the Hindu calendar shows the number of auspicious dates for weddings will drop 40 per cent in the second half from a year earlier.
"Jewellery demand could drop by 30 per cent (year-on-year) in the second half due to fewer weddings," said Prithviraj Kothari, vice president of India Bullion & Jewellers' Association (IBJA). He also expects demand in the second half to come in below first-half levels. The last time this happened was in 2013, according to World Gold Council (WGC) data. As India meets most of its gold requirements through imports, dwindling local purchases during what should typically be the peak season will dent global prices of the metal, with a looming hike in U.S. interest rates and slower demand from No.2 consumer China further adding to the gloom. Earlier this year, the WGC had forecast a revival in Indian demand to as much as 900 to 1,000 tonnes in 2015, citing robust economic growth. But an expected slowdown in jewellery sales and forecasts for below-normal monsoon rains that would crimp the spending power of rural buyers are now marring that optimism. Daman Prakash Rathod, director with Chennai-based wholesaler MNC Bullion, expects jewellery sales in India to soften from mid-June onwards.
SIGNS OF WEAKNESS EMERGE
Signs of weakness in the local gold market have already emerged. Sellers are offering a discount of up to $2 per ounce to London prices to attract buyers, said Kishore Zaveri a gold jeweller based in the western Indian city of Ahmedabad. But buyers could become even scarcer if erratic weather hits India, driving up food prices and leaving less disposable income with consumers, especially farmers. Nearly two-thirds of India's need for gold comes from rural areas where jewellery is a traditional store of wealth for millions who have no access to the formal banking system. Total Indian gold demand could drop to 700 tonnes this year, said IBJA's Kothari. Jewellery sales account for three-fourth of the total, which stood at 811.1 tonnes in 2014. "In villages, for weddings people will swap old gold jewellery for new. Many people don't have money to buy new jewellery," Kothari said.
