(Bloomberg) -- Gold jewelry stores in India this year were less busy on the most auspicious day to buy the precious metal as higher prices and the impact of the coronavirus on incomes and fears of the pandemic kept consumers away.
India’s gold shopping peak typically comes ahead of Diwali, or the Festival of Lights that’s celebrated on Saturday by the country’s more than 900 million Hindus. Referred to as Dhanteras, the day is considered a blessed time to buy gold, cars and major appliances or to start new ventures, and the festival is associated with wealth and prosperity.
Many stores remain open until midnight the day before Diwali, when jewelers offer huge discounts and freebies and some shoppers take time off from work to make their purchases.
Purchases during the Diwali period last year languished because of a weak economy and high prices. It’s looking much worse in 2020, with jewelers facing the poorest sales in a dozen years in the festival quarter of October to December, Metals Focus Ltd. estimated.
“We expected sales to be around 80% of last year’s levels but we are seeing only about 65%-70%,” said N. Anantha Padmanaban, chairman of the All India Gem and Jewellery Domestic Council. “But even that’s OK because the year has not been kind to us. We started off with barely any sales in the first two months. So this is far better.”
Gold demand in India has been battered by the coronavirus outbreak after the Indian government announced the world’s biggest lockdown in March, shuttering stores and bringing economic activity to a standstill.
Gold Demand in India Seen Plunging to Lowest on Record on Virus
Even after the easing of restrictions by the government, consumers were slow to come to back to stores to buy jewelry because of the fear of stepping out of their homes due to the virus. While the pace of new virus infections has slowed in India from a mid-September peak, it is still registering the world’s second-largest case load.
Some shoppers such as 34-year-old Divya Pal still visited their local jewelry stores on Dhanteras to make their traditional token purchases of gold.
“We were scared to step out because of the virus and crowds, but we had to make our Dhanteras purchases,” she said, while browsing ornaments at Mumbai’s U.T. Zaveri jewelry store.
Lower incomes also kept many away after millions lost jobs, while others saw a bigger need to save money in an uncertain period.
While demand from retail consumers has eased, the metal is still a haven for investors. Local gold prices reached a record high in August. That led to sales of gold jewelry, bars and coins almost halving during the January to June period from a year earlier, according to data from the World Gold Council.
Demand on Dhanteras was slightly better in so-called Tier 2 and 3 Indian cities compared with more urban areas. Higher disposable incomes among farmers and a better performing agriculture-based economy in rural towns and cities are expected to boost demand from automobiles to cement to jewelry.
“The footfalls were up by 10%-12% from last year but the average ticket size in terms of weight has gone down because of the significant increase in price on a year-on-year basis,” said Vaibhav Saraf, director at Aisshpra Gems and Jewels. A reduction in the number of virus cases at the jeweler’s location in Gorakhpur city in the north Indian state of Uttar Pradesh, and pre-booking of coins also aided sales during the day, he said.
Jewelers will see lower sales volumes this Diwali season “but we have to be happy that at least in value terms our sales will be higher,” said Kumar Jain, the owner of U.T. Zaveri jewelry store in Mumbai. “The last few months we were simply sitting in our stores and we had to push our business and make people to come out and shop.”
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