Gold prices take sheen off Indian festivities.
THE looming Big Fat Indian Wedding season may lose much of its sheen thanks to gold prices touching an astronomical US$540 (RM1,620) per 10g last month in India, up by nearly double as compared to 2009.
Gifting gold in marriages is a deeply entrenched custom in Indian society, so much so that middle-income families start saving up soon after their children are born – for dowry, in case a daughter is born. Gold gifted to the bride is called stridhan and this is exclusively her property in her new house.
The custom goes back to ancient times when Indian women were not independent and educated which left them vulnerable to societal pressures in case of widowhood or drought due to poor harvests.
Under such circumstances, gold provided the women with financial succor. Though the dowry system is now banned in India, most parents insist that gold be given as gift to the bride. And hence the spiralling demand for jewellery despite staggering prices. Indian households, according to the World Gold Council, have the highest collection of gold in the world estimated at 18,000 tonnes.
The precious metal, whose key drivers are investment and jewellery, is widely seen as a safe haven in times of economic uncertainty and high inflation. In India, gold is also historically and culturally tied to the concepts of wealth and prosperity. INDIA – the world’s largest gold market – imports around 1,000 tonnes of the yellow metal every year and accounts for about 20% of the global demand.
Despite gold’s prohibitive prices, according to the World Gold Council (WGC), about 10 million marriages that take place in India every year can still help maintain the buoyancy of gold demand in the country.
Interestingly, according to the WGC, demand for gold by the Indian and Chinese grew 38% and 25% respectively in 2011, compared to the same period of 2010.
This growth is likely to continue, due to increasing levels of economic prosperity, high levels of inflation and forthcoming key gold purchasing festivals.
“The strength of demand in India and China, coupled with an overall drop in recycling activity this quarter, demonstrates that consumers have adjusted to the current price environment,” said the report.
But now, with the gold juggernaut virtually unstoppable, buying even a small piece of jewellery is throwing nuptial budgets out of kilter. Brides and grooms are being forced to buy less while some are even postponing their weddings till they can muster enough finance (and courage) to buy gold ornaments.
For brides-to-be, jewellery shopping is proving to be a dampener. “I can very well do with diamonds but it’s a matter of family prestige, so we’ve pooled all our resources and bought some light jewellery for my wedding. My uncle helped by giving us a loan of US$5,000 (RM15,000),” says 28-year-old Arti