Jewelers in India may be staring at their worst sales in the key festival quarter in 12 years, as the coronavirus pandemic slams the ability of buyers, especially in cities, to purchase gold.
Demand typically jumps in the last three months of the year, when the biggest Hindu festivals combine with the peak wedding season to boost sales. This year, the outbreak and weak economic growth are likely to push sales below last year’s 194 tons to the lowest quarterly numbers since 2008, according to Chirag Sheth, a consultant at London-based Metals Focus Ltd., which provides data to the World Gold Council.
“We will have to take into account the fact that there is massive amount of unemployment, especially in white collar jobs, and so, that demand may not come,” Sheth said. “Rural demand is strong and we have already seen signs of that. But will the strength in rural demand be able to mitigate the loss in urban demand? We don’t think that will happen.”
Still, demand will fare better than the first nine months of the year, when it suffered after India imposed one of the world’s strictest lockdowns in March to contain the virus. That caused the economy to contract 23.9% year-on-year in the June quarter as businesses and jobs were devastated. India’s number of cases are second only to the U.S.
Purchases of gold jewelry, coins and bars halved from a year earlier to about 252 tons in the nine months through September and demand for the full year could fall to a “multi-year low,” P.R. Somasundaram, managing director for India at the World Gold Council said, without providing any estimates.
“This year, a good monsoon notwithstanding, the price and Covid’s shadow will affect sentiment, though we can reasonably expect at least a part of the pent-up demand to surface,” he said.
Local prices have eased about 10% from a record high in August, when they rallied taking cues from overseas market and a weak rupee, and jewelers are hoping the decline will boost latent demand, especially for weddings that follow the festival period.
“There is pent-up demand in the market due to the pandemic, as mainly many weddings were postponed,” and they will be held in the current quarter now, said Aditya Pethe, director at Mumbai-based WHP Jewellers. “So, we are seeing the last quarter performance would be much better as compared to the entire year.”
Some consumers though may hold back on purchases in expectation of a further drop in prices, said Sheth. “Even if sales in the October-December quarter are 80% of last year’s level, then I think we will have done significantly better,” he said.
(By Swansy Afonso)