Gold is a precious metal that is acceptable as an asset all over the world. This is because it has an expected value and is fine as it is across the globe. That means you don’t have to get it converted into some other form or carry any legal paperwork (except for some cases where quantity is restricted) to take it with you while traveling. Due to this, gold is widely prevalent among investors as well as non-investors.
Indian gold buying season is between October and February, when people buy gold on a large scale in India, during the wedding season, and India’s biggest festival, Diwali.
One of the places to look at the demand for gold, soaring at every point in time, is India. In India, gold is purchased throughout the year, with skyrocketing demands between October and February (also known as the Indian gold buying season), the Indian wedding season, and the time for India’s biggest festival Diwali. During this time, people purchased gold as it is considered auspicious. Moreover, it is a tradition to wear gold jewelry during weddings and festive seasons. Also, it is a significant part of household investments in India. Due to these cultural and financial aspects, India’s demand for gold exceeds 514 tonnes every year. Like every business has a general reserve for future needs, every household has a gold resource for the unforeseen future.
Why is Gold Important in Indian Weddings?
Gold is a tool to showcase wealth and is considered a blessing of Goddess Lakshmi, a symbol of wealth and fortune. Indian weddings are world-famous for extravagant celebrations, days-long affairs, and head-to-toe dressing up inexpensive clothes and jewelry. Therefore, the Indian parents consider it a blessing to gift gold jewelry to the bride and bridegroom as they believe it will bring good fortune to the couple. It doesn’t matter if the family is rich or poor, they purchase and gift gold to the bride and bridegroom according to their ability, but the gold has to be granted to carry on the tradition.
It not only brings a promising future but also completes the Indian traditional wear. Indian formal wear is incomplete without gold jewelry. This is why the bride wears gold, enhancing the beauty of the whole wedding outfit and the bride. Due to the reason that over 20 million weddings take place in India every year, the demand for gold is always high here and hence playing a significant part in the world market of gold (see forex market opening time in India)
Gold Imports and Prices
India does not produce as much gold to meet its ever-growing demand. As a result, a significant part of its gold demand is fulfilled by imports. And due to this high demand, the price of gold surges high in the global market, especially from October to February. It was recorded in 2017 that there was an increase in the spot gold prices due to the surge of 67% of gold demand in India, which was approximately 855 tonnes in that year.
Only Indian demand for gold cannot be the only factor responsible for the price of gold in the global market. Several other factors like worldwide supply and demand, inflation rates, geopolitical factors, weather, etc. Still, such a waste demand from India does cause a significant impact on its prices globally. Not only this, traders and investors find it profitable to exploit the high-end demand time of gold in India. They state that buying gold in September and then selling it in October onwards results in about 80% of cases. The Moore Research Centre even highlighted this study in the year 2016.
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Other Driving Factors that Affect Gold Prices
It is evident that the demand for gold in India, especially during the wedding season, majorly influences its price in the global market. But there are other factors as well that can affect the gold price. These are:
- Several countries keep gold reserves in their central banks to protect their currency in the event of inflation and become self-reliant instead of depending upon foreign exchange. The number of such gold reserves impacts the prices of gold globally.
- The changes in interest rates in the financial market can also influence the price of gold. If the interest rate is low in the market, it results in more purchasing power in the people’s hands. Hence they can buy more gold to keep as a reserve. On the other hand, increasing the interest rate can influence people to sell their gold and put money in the market to gain better returns. Hence this changing demand and supply affect the gold prices.
- Since not every part of the world is rich in gold reserves and depends upon imports, the duty and taxes imposed can change the gold prices.
- During the inflation period, people tend to keep gold as a protection tool. This is because, during inflation, a currency loses its value, but gold remains what it is. So people use it as a factor of protecting their wealth.
Hence, it is always advised to keep an eye on all the factors apart from the Indian wedding season while investing in gold.
He is an expert in financial niche, long-term trading, and weekly technical levels.
The primary field of Igor's research is the application of machine learning in algorithmic trading.
Education: Computer Engineering and Ph.D. in machine learning.
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