Does the Indian wedding season spur gold demand?

News Arnulf Hinkel – 10.10.2017

While China is the country with the largest demand for gold overall, Indians buy more gold jewelry than any other nation in the world. In India, the most important occasions to buy gold jewelry for are weddings, which are not only celebrated on a grand scale, but which primarily take place in one particular season: in autumn.

This Indian wedding season has proven a reliable and recurring attraction for speculators seeking to benefit from the short-term momentum in gold demand. However, investors aiming to join in the fray should bear in mind that gold demand depends on a multitude of factors. Since the global development of national key interest rates is quite predictable for the time being, it is currently important to keep an eye on geopolitical factors: how will the crisis between North Korea and the USA unfold, and how will the Catalan separatists' efforts to gain independence from Spain play out? If these issues were to be resolved or at least reined in, demand for gold could decrease, offsetting or even overcompensating the surge in demand caused by the Indian wedding season.

In addition, there are many indications that the increase in gold demand for this year's wedding season could be weaker than usual, as many Indians may have stocked up on gold jewelry well before the country’s major tax reform and the associated tax increase for gold products came into effect on 1 July 2017. This assumption is also bolstered by a 41 percent rise in demand for gold jewelry in India in the second quarter of 2017 (versus Q2 2016). According to the World Gold Council, the global increase was only 8 per cent over this period. Consequently, any speculation about higher gold prices due to the Indian wedding season would be anything but a safe bet this year.

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