Diwali gold buyers change their approach as prices rise

• Gold is up 34% in a year
• Diwali crucial time for gold sellers
• Consumers buying lower-karat gold

Dhanteras, the first day of Diwali, is seen as an auspicious time to buy gold by the Gulf’s roughly three million Hindus. But as the price of gold hits record levels consumers are shopping differently, gold traders told AGBI.

Gold’s price has surged by 34 percent in the past year alone. This trend is being driven by geopolitical uncertainty and a surge in asset prices.

Allianz Group’s chief financial officer Mohammed El-Erian also says a gradual de-dollarisation in favour of gold in central bank purchasing around the world is contributing. 

This price increase is changing consumer behaviour. Demand remains high, particularly during Diwali, but gold buyers this year are more price sensitive.

Chirag Vora, managing director of Dubai-based Bafleh Jewellery, says: “Despite the record-high gold prices, consumer demand is adapting rather than being hampered.

“Customers are increasingly looking for discounts and shifting their preferences toward lightweight gold items and diamond jewellery, which offer a more affordable option.”

Diwali is a crucial time for jewellers and traditionally results in a large spike in sales, Vora says. “Diwali, especially Dhanteras, is critically important for the gold business. The last quarter [of the year], driven by Dhanteras, is anticipated to see a 30-40 percent increase in sales compared to other quarters.” 

Andrew Naylor, head of Middle East at the World Gold Council, says retailers have already reported a “noticeable preference” for 18-karat jewellery over costlier 22-karat pieces; significantly cheaper pieces, because of their lower purity.

While consumers may be looking for cheaper options in the face of record-high gold prices, Diwali’s impact as a driver of demand on the gold market is continuing unabated.

“For many, gold buying during Diwali is a form of wealth transfer, symbolising prosperity, which often outpaces other periods,” says Naylor.

“These trends help anchor Diwali’s standing as a cornerstone of annual gold demand, setting the pace for Q4 sales globally. In the UAE and GCC, retailers are likely to see increased footfall and inquiries, as many buyers prepare for Diwali-related purchases.”

Rashid Al Harmoodi is senior director of property management at Ithra Dubai, which opened the Dubai Gold Souk – The Extension in April 2022. 

He says local prices are likely to spike in line with increased Diwali demand: “The rise in gold prices naturally follows demand, especially during Diwali, when gold is valued most as a cultural and financial asset.

“In the UAE, where per capita demand for gold jewellery is the second highest globally, import prices often spike to meet strong local demand.”

• Record gold price dents demand for Swiss bullion in Gulf
• Turkey’s real estate proposal: turn gold into bricks
• UAE agrees to review India’s precious metal export concerns

Al Harmoodi adds that, with an annual gold demand of close to 40 tonnes, the UAE’s relationship with gold underscores its hybrid role as both a cultural tradition and a financial investment.

Beyond Diwali, during which local prices are likely to remain high, there are few signs of gold’s price dropping in a meaningful way any time soon.

Geopolitical tensions – thought of as a key driver for gold’s price, as investors seek safe places to put their cash – have faded in recent days as tensions eased slightly in the Middle East. Despite that, gold’s spot price pulled back just 0.7 percent.

“Gold prices slipped from recent highs in Asian markets on Monday as reduced fears of a broader Middle Eastern conflict softened safe-haven demand for the metal,” says Mohamed Hashad, chief market strategist, at Noor Capital.

Gold prices were near all-time high levels on Tuesday, Reuters reported. Spot gold was up 0.3 percent to $2,750.99 per ounce as of 0838 GMT, just under the record high of $2,758.37 hit last Wednesday.