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Why India’s gold sales shine

As the world’s second largest consumer of gold, India can exert a significant influence on the precious metals market. Indian demand is particularly robust for one of the country’s key festivals, Diwali, which starts this week.

Perhaps the most important and widely celebrated Hindu festival, Diwali celebrates the victory of light over darkness and honours Lakshmi, the goddess of wealth and prosperity.

This year could prove to be a bumper one following a decision by the Indian government to exclude gold retailers from the provisions of the Prevention of Money Laundering Act. The move has freed customers from the need to provide their tax code for every purchase above 50,000 rupees.

Precious metal consultancy GFMS has reported that India’s gold imports in September were up 31% from a year ago as jewellers increased their purchases to meet the expected demand*.

The country’s imports could rise above 70 tonnes for October as banks and other importers are increasing overseas purchases for the five-day Diwali festival, GFMS said. “Higher purchases by India, the world’s second-biggest consumer, could lend support to global prices,” it added.

Diwali, or the festival of lights, is one of a number of significant Hindu festivals celebrated at this time of year. Late last month Hindus celebrated Dussehra, the victory of good over evil, during which gold buying is also considered auspicious.

But perhaps nothing displays India’s insatiable appetite for gold more than the wedding season which takes place between October and December

There are up to 20 million weddings in India every year and brides love to take gold jewellery to extravagant levels, many wearing spectacular hair accessories, nose rings, earrings, necklaces and amulets.

At these highly ritualised events gold is liberally exchanged among couples and their families in the form of gifts or coins. These symbols of prosperity and security epitomise gold’s deep-rooted allure in Indian culture.  

As well as signifying wealth and status, gold has been part of worship, culture and mythology for thousands of years. No possession is deemed more valuable.

No wonder that when plentiful monsoonal rains boost crop yields, there is nothing flush farming folk like more than exchanging their hard earned cash for gold. It’s said the rural population account for about a third of India’s gold consumption.

There’s also plenty of interest for gold among the country’s burgeoning urban middle class, with wealthy investors and speculators now trading in the metal at the heart of many Indian traditions.

*Reuters

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