Indian gold sales set to fall to lowest in a decade as Covid-19 scales back weddings and festivals

Sales of gold in India are expected to drop to their lowest levels in over a decade, as the Covid-19 pandemic slashes consumers’ ability to purchase the precious metal.

During the last three months of 2019, Indians bought more gold than any other country at 136.6 tonnes. Gold is a traditional wedding gift in India, popular during the 'wedding season' when temperatures fall at the end of the year, and also at Hindu festivals.

But, India is currently struggling to contain the world’s second largest Covid-19 epidemic and a draconian two-month lockdown from March pushed an estimated 400 million Indians into further poverty, according to the International Labour Organisation, as well as halting large weddings and travel for festival celebrations.

At least 100 million people lost their jobs during April alone and unemployment rates remain high in India’s cities, where 90 percent of the workforce earned informally.

This means they were employed without a contract and supported their families with what they were able to earn in cash during that day - driving an auto rickshaw, running a street stall or labouring on a construction site.

Many consumers who would have purchased gold over the upcoming months are now struggling to pay their rent as work ground to a halt among restrictions and a record 23.9 percent contraction in the Indian economy in the three months until June end.

“We will have to take into account the fact that there is [a] massive amount of unemployment, especially in white collar jobs, and so, that demand may not come,” Chirag Sheth, a consultant at the London-based Metals Focus Ltd., told Bloomberg.

“Rural demand is strong and we have already seen signs of that. But will the strength in rural demand be able to mitigate the loss in urban demand? We don’t think that will happen.”

Traditionally, gold was a gift at India’s famously extravagant weddings but attendees are now limited to 50 or less people in many states.

Celebrations for major Hindu festivals in the Autumn, including Dussehra, have also been muted. Many Indians have avoided gathering in large numbers or traveling to meet with family members and exchange gifts.