Gold prices in India fell by ₹133 to ₹75,028 per 10 grams on Wednesday, October 9, following weak global trends. The Multi Commodity Exchange (MCX) showed December gold contracts trading down by 0.18%, amid a business turnover of 14,488 lots.

Analysts attributed the decline to global market cues, where gold futures dropped by 0.13% to $2,632 per ounce in New York.

Geopolitical tensions and shifting economic data impact gold prices globally.

Renisha Chainani, Head of Research at Augmont, noted that peace talks in the Middle East, rising US Treasury yields, and stagnant Chinese gold purchases have recently weighed on gold prices.

“Gold fell 1.5% to $2,624 per ounce as demand for safe-haven assets decreased,” Chainani said.

Price surge dims festive season hopes

Despite recent price declines, gold has seen a significant rebound in recent months, impacting the festive season outlook in India.

The Indian bullion industry had high hopes for a boost in gold demand following the government’s import duty cut in July, which brought gold prices to a four-month low.

However, the subsequent rally in prices has cast doubt on the expected surge in demand.

“Everyone was optimistic after the duty cut, expecting a robust festive season,” said Prithviraj Kothari, President of the India Bullion and Jewellers Association (IBJA). “But with prices bouncing back just before the festivals, we may see a 20% drop in demand volume.”

Shifting consumer buying patterns

India, the world’s second-largest gold consumer, traditionally sees a spike in gold purchases during festivals like Dussehra and Diwali. However, this year, higher prices have led to a shift in consumer behavior.

Amit Modak, CEO of PN Gadgil and Sons, noted, “Consumers are opting for lighter, more affordable jewellery to stay within budget. The sharp rise in gold prices has stretched the spending power of many buyers.”

Since the last festive season, gold prices have risen by more than 25%, further straining the budgets of gold buyers.

Investment outlook for gold

Despite high prices, experts suggest gold remains a solid investment.

“Given the current market dynamics, a strategic approach to gold investment is essential this festive season,” advised Kothari.

“Gold continues to serve as a hedge against inflation and market volatility. A modest allocation of 15-20% in gold can balance risks, especially with equity markets showing mixed signals,” he said.

Kothari also recommended a “buy on dips” strategy for investors looking to capitalize on temporary corrections.

Gold Exchange-Traded Funds (ETFs) are becoming popular, offering liquidity, transparency, and global price alignment, making them an attractive option for short- to medium-term investors.

–With inputs from agencies