During the busiest holiday season, gold can lose its lustre due to increased costs that could negatively affect demand. The World Gold Council predicted that the lowest number of purchases in three years may result from rising gold prices. Despite today’s decrease, gold prices are still very close to record highs, and India—the second-largest gold consumer in the world—may see a drop in purchases of the valuable yellow metal. A move like this may put an end to the recent surge in gold prices worldwide, reduce India’s trade imbalance, and strengthen the rupee.

It is important to note that demand for gold in India usually rises near the end of the year, around the time of big festivals like Diwali and Dusshera and the customary wedding season. This is because purchasing gold is associated with good fortune.

The current spike in local gold prices, which reached Rs 61,396 per 10 kilos, is still quite close to the record high of Rs 61,845 set earlier this year. By contrast, the December quarter prices of the previous year were about 20% less than the levels of this year.

Demand is predicted to be lower in the December quarter than it was in the previous year when 276.3 metric tons were reported. The market is greatly impacted by the present pricing. However, because Diwali is scheduled for the second week of November, a significant price decrease closer to the holiday can potentially alter the course of events.

India consumed 210.2 metric tons of gold in the July–September quarter, up 10% from the previous year. This rise was mostly due to better demand for jewellery and investments as a result of local gold price adjustments.

Nonetheless, the demand for gold fell by 3.3% to 481.2 metric tons between January and September, which was indicative of the year’s slow demand in the first half. Demand is expected to drop from 774.1 metric tons the previous year to about 700 metric tons in 2023, the lowest level in three years. The selling of old jewellery and coins by some people as a result of rising gold prices has increased scrap supply by 37% to 91.6 tons in the first nine months of the year.