Gold-loving India can't afford the yellow metal

India is the world’s largest importer of gold, but sales were dented as global gold prices reached record highs.

A gold purse at the Gem and Jewellery India International Exhibition in Chennai (Madras).

• A local, slice-of-life story from a Monitor correspondent.

Winter in India is normally the time when gold shines brightest. Sales of the auspicious yellow metal rise during autumn religious festivals and peak during the winter wedding season, when newlyweds are bedecked with jewelry. India is the world’s largest importer of gold, accounting for about 20 percent of global demand, so its purchasing patterns are vital to gold sellers.

But sales have been dented even in traditionally fail-safe India as global gold prices reach record highs. At Krishna and Sons, a jewelry store established in New Delhi in 1935, business has been slow, admits owner Khanna Neeraj. Glass display cases are full of buttery bangles, pendants, and earrings. Mr. Neeraj, a third-generation jeweler, proudly opens a velvet box to show an elaborate filigreed necklace that is favored by brides. However, on a recent afternoon the shop was empty of customers.

In December, the price for one ounce of gold reached an all-time high of $1,227 an ounce; six months earlier, an ounce had cost about $930. While gold has dropped back below $1,100 an ounce, the metal continues to serve as a haven for skittish investors who buy it when stocks, real estate, and other investments falter. 

Higher gold prices have made Indian consumers reluctant to open their wallets. That, plus the economic downturn and India’s less-bountiful year due to drought, translated into a 49 percent drop in gold sales in the third quarter of 2009 compared with the same period in 2008, said the World Gold Council (WGC).

The WGC, which represents the largest global gold mining companies, has launched marketing campaigns in India to try to coax its largest market back into buying mode. Indian movie stars have been recruited for ads, and retailers are being trained in in-store marketing. The WGC has sponsored contests to encourage sleeker, more contemporary gold jewelry designs. 

Gold sellers hope these measures will help business. And with Citigroup analyst Alan Heap predicting the gold price will fall as low as $820 per ounce – by 2014 – gold may yet regain its luster in India. 

of stories this month > Get unlimited stories
You've read  of 5 free articles. Subscribe to continue.

Only $1 for your first month.

Get unlimited Monitor journalism.