The world's most important gold market is not what it used to be.
Just ten years ago, India's hunger for gold jewelery and bullion meant that it accounted for about a quarter of global demand. Consumption has since fallen by around 24 per cent. Ahead of Sunday's Diwali festival, when purchases traditionally peaked, September imports dropped to their lowest level in three years.
Part of this is a reaction to short-term price factors. Buyers tend to stay away when the bullion price in Mumbai rises above about 30,000 rupees ($ 422.97) for 10 grams. Thanks to the decline of the rupee and the metal that has broken through the long-standing ceiling of $ 1
However, there are long-term problems to worry about. About two-thirds of the country's gold is bought in rural areas, where its traditional roles such as investment and decoration are intertwined. Rural Indians are far more likely to buy gold jewelry than their urban counterparts, and tend to favor ordinary pieces that can easily be appreciated and traded if money is tight.
To be sure, the lure of gold cannot be wiped out by banks. Another reason why purchases tend to be so tight at the end of October is that it is peak wedding season. About half of India's demand for gold jewelery is for the heavy pieces worn as part of a wedding dress, according to the World Gold Council. Consumer spending, the other major part of gold demand along with investment (industrial use is a distant third), will tend to increase with revenue, taking advantage of the same urbanization that is depressing in rural areas.
However, consumers are a tough market to target this year. Purchase of cars, usually a good power of attorney for the audience's appetite for items with big tickets, collapses. Sales of cars, trucks and buses fell by more than one-third in September from the previous year, and two-wheelers were down 22.1 percent.