The Gold price (GC=F) rallied towards $1,660 (£1,467) on Monday with buyers racing to buy smaller quantities of bars and coins that may be presented as gifts during Diwali.
A time for feasts, prayers and fireworks, Diwali is one of the most important festivals in India and is celebrated by Hindus, Jains and Sikhs across the world.
The precious metal has been climbing since Friday amid positive market sentiment, picking up from the two-year low of $1,614 and advancing towards the $1,660 mark, after witnessing a strong buying interest.
Dhanteras, which marks the first of the five days of Diwali, is considered an auspicious time to buy gold and silver as part of Hindu festivities. It was celebrated on Sunday this year.
However, the rally might be short-lived with market analysts warning the price could come back down after the festival.
“Gold should find physical market support given seasonal demand ahead of Diwali... If physical demand fails to cushion the downside during October, gold could find itself open to sharp declines in coming weeks,” Standard Chartered (STAN.L) said in a note.
The exact dates of the festival change each year and are determined by the position of the moon. This year, Diwali is being celebrated on Monday.
Lakshmi, the Hindu goddess of fortune and prosperity, is associated with gold, making gold gifts a key part of the festival of lights.
Buying gold in its physical forms such as coins, bars or jewellery is a ritual in itself as gold and silver (SI=F) are believed to bring wealth and luck to Hindus.
The Royal Mint usually experiences a surge sales of gold surge in the run up to and during the period of Diwali, with its 20g, 5g and 1g gold Lakshmi bars proving extremely popular, as the festival marks the anniversary of Lakshmi’s incarnation from the depths of a bottomless ocean.
The festival of lights will be celebrated with fireworks on Monday night until 1am in several cities across the UK, with Leicester — renowned for hosting the largest celebration outside of India — expected to see performances featuring giant puppets and a lantern parade.