Gold Price in India - Diwali effect

India is waiting for its most celebrated festival of the year i.e. Diwali. Over last many years, we have seen that Diwali bring steep increase in Gold price. There is Saying that Gold makes the Indian economy go round during the festive season won’t be too much of a stretch. Since time immemorial gold has been the choice of investment for Indians; Diwali season is just one of the biggest excuses to buy it. Unfortunately the recent economic scenario has made it impossible for everyone to afford Gold. It has risen more than INR 1,000/GM since last year. In last 60 days, gold price is moving between INR 2500/GM to INR 2800. In this uncertain economic time, Gold is really the metal for the pallet?

Let us look at why Gold has been such a favourite among the buyers. Buyers can roughly be classified into two categories:

1. People looking at Gold as a family heirloom – Every Indian family at one point or the other has bought gold, not because they like it or because they think it makes a good investment option, but purely because it is an heirloom that can be passed down to the coming generations.
2. People looking at Gold as an investment – The prices of gold over a period of time generally tend to move up. Especially in a country like India where gold is bought keeping the long term perspective in mind, it becomes even more lucrative.

For the first category, Diwali will be a big sale season (irrespective of the prices) as the amount bought is usually smaller compared to that bought by investors.

For the second category, the question that begs to be asked is, will the gold prices stabilize or will it go down further before beginning its climb again. At the end of the day, its climb is inevitable.

Next Page: Let us look at some of the factors affecting prices of Gold in India.

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Credit: Ms N Khanna