24 January 2012

Buying Gold for Indian Weddings

With gold jewellery woven into the culture, tradition and different religions of India, Indian households are pulling out all the stops and splashing big money on the precious metal this wedding season.

"Indians prefer to get married in winter to avoid the monsoon rains and summer heat. Typically, the wedding season runs from November to February and though Gold Prices are ruling at their peak at this time of the year, the average consumption per household has clearly gone up twice over,'' says Mahesh Zaveri, gold jewelry retailer.

Traders say brides are Buying Gold this season in greater quantity and even relatives are offering gold bridal sets as gifts for the trousseau. "Most households start saving for a marriage years in advance, so a small dip or rise in the price of gold will not upset demand,'' said bullion businessman Motabhai Kainan.

He added that spot gold rates had marginally slipped in major cities in India on Friday, even as the wedding season entered its final fray. In Mumbai, rates were down $6.95 per ten gram at $551.62, while in the Jaipur market, pure gold was down $4.95 at $548.61 per 10 gram. In the Delhi market, pure gold was down by $1.98, while in Chennai it slid by $2.57 and in Ahmedabad by $3.07.

With the country hosting 10 million marriages every year, traders said almost 70% of gold jewelry is sold in India during the wedding and festival season. One estimate has it that gold and jewelry make up 50% of total Indian marriage expenses.

"It is traditional and an ingrained custom of giving gold at weddings. Soon after children are born, families start saving by buying up small quantities of gold, especially to be given away to the bride which would become her exclusive property. Sometime, gold bars and not just gold jewelry are also given away to the family of the groom as a kind of insurance and benevolence,'' said Kainan.

He added that most marriages were incomplete without a significant investment in gold. "At the time of marriages, gold is actually worshipped before being put on the couple,'' he said.

Traders say that on average at least 30 grams to 40 grams of gold is consumed in every marriage across the country. In richer households though, this easily shoots up to several kilos of gold, especially to be displayed at the time of a wedding.

Incidentally, it is not necessary that the biggest gold jewelry piece is worn by the bride or members of the bride's household, those attending the wedding often try to outshine the bride by decking themselves in the finest new style.

"Everyone wants to look better than the other. It is a crazy set up during marriages, when one buys gold sets (which include earrings, bangles, toe rings and necklaces) running into beyond $5000. This could triple with the richer houses. Then there are gifts of gold. Richer households even serve welcome drinks with 18 carat gold leaf trimmings,'' said Preeti Aluwalia, wedding planner and jewelry designer.

She added that tons of gold jewelry is displayed at parties that precede weddings, sometimes which run on for an entire week. "In smaller towns too, people are continuing with their wedding purchases and gold continues to be an integral part,'' she added. Aluwalia was referring to smaller towns in Raipur, Kolkata, Bilaspur and Gondia.

Traders added that sentiment in gold would remain firm on rising demand from retailers, despite the price of the yellow metal increasing in the overseas markets. Gold price peaked on January 17, at $1667 per ounce, more than 9.4% above the five month low touched in late December.

According to a report by Macquarie, the Australian investment bank, Indians own gold worth nearly $1 trillion. Despite Gold Prices rising 64% in Rupee terms between January 2010 and September 2011, gold consumption in India has remained relatively robust in volume terms, up 5% year on year up to September 2011.

However, a weak Rupee, combined with Gold Prices that hit a record $580 for 10 grams on November 15, dampened demand during the festive season. Over the last 12 months, the plunge in the Indian Rupee's forex value has made the price of gold jump 10% higher.

Economists predict that with a hike in the per capita income, the average consumption of gold during weddings is set to nearly double in the next five years.

Source: MineWeb's Shivom Seth in Mumbai.. http://goldnews.bullionvault.com/buying_gold_012320123

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