Gold Sales Dip on Ganesha Chaturthi Amid Rising Prices; Future Outlook

During this year's Ganesha Chaturthi celebrations, gold sales experienced a noticeable decline, with industry experts estimating a drop of around 15% compared to the previous year. The primary factor behind this downturn was the significant rise in gold prices, which made the precious metal less affordable for many consumers. As a result, buyers adjusted their purchasing habits, opting for smaller quantities and lighter jewellery designs to stay within budget.

Ganesha Chaturthi typically marks the beginning of the festive season in India, a period when gold purchases generally increase, often driving prices up. However, this year deviated from the usual trend as sales remained subdued despite the festival's cultural importance. Analysts attribute this shift mainly to a sharp surge in domestic spot gold prices over the last two to three years.

According to Vandana Bharti, head of commodities research at SMC Global Securities, gold prices have nearly more than doubled during this period, rising from approximately ₹69,000–₹70,000 to over ₹1,57,000 per 10 grams for 24-karat gold. This steep increase, combined with making charges ranging from 10% to 25% and a 3% Goods and Services Tax (GST), has pushed heavier gold jewellery beyond the financial reach of many buyers. Consequently, consumers are turning towards lighter ornaments, gold coins, and paper gold products.

Despite the decline in physical jewellery sales, experts emphasize that the interest in gold itself remains strong among Indian buyers. Akshat Garg, head of research and product at Choice Wealth, explains that the reduced volume in jewellery purchases does not indicate a waning affection for gold but reflects a transformation in buying patterns. The domestic gold price has surged about 60% in the past year, influenced by a global rally, the depreciation of the Indian rupee against the US dollar, and an increase in import duties from 6% to 15% in April.

With traditional heavy gold necklaces becoming less affordable, buyers are increasingly focusing on alternative forms of gold ownership. These include exchanging old jewellery for new lighter pieces, investing in gold coins, and purchasing digital gold or exchange-traded funds (ETFs). Digital gold and ETFs are particularly gaining traction because they eliminate making charges, are easier to store, and allow investors to buy in smaller amounts.

Gold ETF inflows have surged notably, with a 67% month-on-month increase to ₹2,597 crore in August, raising total holdings to 121 tonnes. Year-on-year digital gold purchases more than doubled in the same period, while gold imports dropped by 58% to $2.3 billion. This trend points to a clear separation between jewellery purchases, often motivated by cultural events like weddings, and gold held purely as an investment.

Digital gold and ETFs also lower barriers to entry, allowing investors to start with small sums without needing large capital reserves. Additionally, these investment forms reduce risks associated with physical gold ownership, such as theft, locker fees, and storage concerns. Vandana Bharti notes that the shift toward paper gold products will likely continue, with physical gold maintaining its cultural significance primarily for major rituals and weddings.

Aditya Agarwal, CFA and Chief Investment Officer at Avisa Wealth Creators, highlights that gold coins and ETFs are increasingly preferred by investors focused on the asset's financial benefits. Unlike traditional jewellery, these options avoid making charges and facilitate easier transactions in smaller amounts. Agarwal anticipates this preference will persist even as jewellery demand rises during the wedding season. However, he points out that digital gold, while convenient, lacks the regulatory protections provided by Securities and Exchange Board of India (SEBI)-regulated gold ETFs.

Looking ahead, experts maintain a cautiously optimistic outlook for gold prices. Bharti believes gold remains on a long-term upward trajectory due to factors such as central bank purchases, ongoing currency devaluation, geopolitical tensions, and the weakened rupee. Nonetheless, short-term fluctuations are expected, influenced by potential US interest rate hikes and other global economic conditions.

Satish Dondapati, Fund Manager for ETFs at Kotak Mutual Fund, suggests that while prices may be volatile in the near term, the trend toward investment in digital gold and ETFs is likely to continue. Akshat Garg advises investors to gradually accumulate gold via ETFs or gold funds rather than making lump-sum purchases, recommending a portfolio allocation of 10% to 15% in gold as a prudent strategy.

This evolving landscape reflects broader changes in how Indian consumers approach gold, balancing tradition with modern investment methods. As gold prices remain high, buyers are adapting by diversifying their gold holdings and embracing digital options, signaling a transformation in the market that could persist over the coming years.