The unprecedented surge in global gold prices has raised concerns about dampened demand during India’s wedding season, as domestic prices in the world’s second-largest gold consumer have soared to record levels. In contrast, China, another major gold buyer, is anticipated to sustain strong safe-haven demand amidst the price rally. Analysts are closely monitoring the divergent impacts on these key gold markets.
With benchmark spot prices reaching a historic high of $2,164.09, driven by expectations of U.S. monetary easing, investors are increasingly drawn to gold as a safe-haven asset amid uncertainties in competing markets like Treasury bonds and the dollar. In India, the surge in prices has led to reduced consumer demand, prompting dealers to offer discounts over official domestic prices to stimulate buying activity.
Prithviraj Kothari, president of the India Bullion and Jewellers Association Ltd., expressed concerns about the impact of elevated prices on wedding season demand, noting that banks and refiners may curtail imports if prices remain elevated. Meanwhile, in China, dealers have adjusted premiums in response to market dynamics but anticipate sustained demand throughout the year, particularly driven by safe-haven considerations.
While Indian consumers are resorting to exchanging old jewelry for new purchases amidst price hikes, Chinese buyers are expected to adapt to the new price levels over time. The evolving market dynamics suggest a potential shift in buyer behavior, with price sensitivity giving way to a validation of gold’s investment appeal as prices climb higher.
Analysts also foresee the surge in gold prices attracting new investor interest globally, potentially revitalizing buying activity in regions like Germany, a significant retail hub for gold coins and bars. The market response in different regions underscores the complex interplay between price movements and consumer behavior in the gold market.