Diwali, Gold and India –  Is the Love Affair Over?

I live in Dubai where Diwali has been the focus for many this weekend. With Diwali comes not just fantastic light displays and celebrations but also huge adverts for Hindus to buy gold for their loved ones in India and throughout the world.

Buying gold at Diwali is a religious or spiritual act and it is considered auspicious and thought to bring good fortune and prosperity.

diwali_gold_2017Win Gold Coins for Shopping

Not only are there offers to buy gold jewellery, bars and coins but there are competitions to win gold.  When I went to do my weekly shop at a Carrefour I was delighted to see a gold coin on display that I could win.

‘The more you shop the more coins you can win’ the poster told me, so on I shopped convincing myself I was making a possible investment decision.

Double page spreads, billboards and radio adverts regarding gold are not uncommon here and are very much a part of day-to-day life. The gold price, UAE gold coin and reports of gold take front and centre of the daily newspaper. Back in London an FT mention of gold and at least six people forward it onto me. In Dubai, the Middle East and much of Asia, it’s no big deal.

Whilst the local Emirati population has a desire to hold gold it is the Indian population (who represent 42% of society here), their countrymen and their love for gold, that has me fascinated this week.

India is often quoted as the world’s largest gold importer, a crown that has been wrestled away by China, but both still rule the charts. This is a relatively new phenomenon for India. Until 1990 gold imports were pretty much banned, just eight years prior to that only 65 tonnes of gold had been brought in, by 2010 imports had reached over 1,000 tonnes.

We have written about India’s understanding of, spiritual affinity and love of gold in the past, usually around this time of year when everyone starts writing about it. It is festival and wedding season, and it is one of the few periods when mainstream precious metals analysts actually look at physical demand and supply – the heart of what makes gold so interesting. They look away from the hot air the West spews out about the dollar, all powerful central bank interest rate changes, presidential elections and EU traumas affecting the gold price and instead tell a real human-based story about gold demand in India, and how it provides strong underlying support for the gold price.

But this year something has changed. I am now living in among this desire to buy gold yet at the same time I am reading on Bloomberg and Reuters that the Indian gold market is on its knees.

Is this love trade really over? Was the bustling gold souk in the old part of Dubai just a mirage?

The truth is, the Indian gold market has had some tough blows in the last few years. And yet, he Indian gold market has shown incredible resilience over the years. Despite this, every single year without fail, there are renewed warnings and misleading headliens regarding a decline in Indian demand.

We are in the final quarter of the year when gold demand should be booming. Yet Bloomberg interviewed ‘five jewellers and traders’ (yes, five, an excellent sample size in a country of 1.25 billion). The findings of the survey concluded that ‘

[gold] demand has just fallen off a cliff’ and predicted that just 650 tonnes would be imported this year.

Has gold demand fallen off a cliff? Why does Bloomberg think so? And why is this only important at this time of year?

Why do you only care about India during Diwali?

It is considered auspicious to buy gold during the festivals of Diwali and Dussehra, and this additional demand for gold is adde