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Diwali Festival Boosts India’s Gold Demand, But Higher Prices Weigh

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Diwali Festival Boosts India’s Gold Demand, But Higher Prices Weigh

(Kitco News) - Gold demand picked up in India this week, as consumers were buying more gold during the Diwali festival, but higher prices kept a cap on purchases.

Despite more activity, demand was still lower than last year, Reuters quoted Nitin Khandelwal, chairman of All Indian Gems & Jewellery Trade Federation, as saying.

“In some regions, demand was nearly 30 percent lower than normal, but in others, it was on par compared to last year. Overall for the country, demand was down around 15 percent,” Khandelwal said.

Diwali festival is known for gold buying in India. It celebrates victory of light over darkness and comes right before India’s wedding season, so it is considered a lucky time to buy gold.

But, higher gold prices kept some people away this season, according to one jeweler. “Consumers were price sensitive and buying less gold than last year. They had a very tight budget,” said Mangesh Devi.

The yellow metal rose almost 8% in India since the start of 2017.

During the Asian open on Friday, gold on Kitco.com was seen trading at $1,284.90, down 0.37% on the day.

Some Indian consumers blamed the new 3% nationwide sales tax, which was introduced on gold and gold jewelry on July 1.

“This year, my husband's business is down due to GST (Goods and Services Tax). That's why I reduced spending on gold,” said Sangeeta Pardesi.

Those looking to buy the precious metal for a cheaper price headed to Dubai this year, media reports said.

Some jewelers in Dubai reported at least at 20% rise in sales ahead of the wedding season in India, as buyers ripped the benefits of various tax breaks, according to CNN.

Indians can export a certain amount of gold duty free from Dubai. The amounts are 1.4 ounces for women and 0.88 ounces for men.

“Dubai will always be something like 6-9% cheaper than Indian jewelers when it comes to (gold),” Gaurang Desai, CEO of the Dubai Gold and Commodities Exchange (DGCX) told CNN.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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