Price decline likely to trigger gold buying during Diwali

Finally, some good news - this Diwali, you will be able to pocket gold at your heart's content.

The yellow metal may lose some sheen this Diwali as prices are likely to fall to Rs 6,500 per 10 grams (about $452-455 an ounce), traders and analysts said.

A variety of factors such as profit booking by overseas funds, lesser number of weddings in India this year and the Indian festive demand not matching the market's expectations are behind the fall.

"Wedding demand is at its lowest ebb this season unlike traditionally, when around this period, despite high prices, buying continues," said a Delhi-based jeweller. And all blame it to the stars.

This year for over a month now, stars were not favourable for nuptials and the case remains so for another one month. "The inauspicious one-month period of Shrada ended October 4 and two days later (on October 6), a long inauspicious period began, which will end on November 20," said Devi Prasad Narayan, a pundit at Delhi's Hanuman Temple.

Narayan said, "In the long period, some weddings may happen on November 12, that is Tulsi Vivah. Next auspicious period is between November 21 and December 12 and then between January 6 and February 14."

Thus, lesser number of weddings are possible in the remaining period this year, thereby making January 2006 as the busiest wedding period in the current festive season. With most gold buying done for marriages, and the marriage season now spread out, buying pattern too is seeing a spread across the year.

Marriage planners too, are feeling the heat as not much business is coming their way this year. "It is a season when usually most planners charge a premium. However, this is not the case this year," said a Mumbai-based wedding planner.Gold demand considerably has come down this season with gold prices spiralling to an all-time high of Rs 7,000 per 10 grams.

"Though usually the festive demand accounts for around 40 per cent of the annual sales, due to the spiralling prices this year, the same may not happen," said Harmesh Arora, vice president of Bombay Bullion Association.

According to a trader with a top private sector bank, "Jewellers are not picking much from us and on several days, the offtake is just zero. This has hit our business this season."

The domestic gold jewellery buying trend has matured over the years and is not just restricted to festivals. The rural India, which contributes to almost 60-65 per cent of gold jewellery purchase in the country, too has smartened over time and prefers to buy on dips, says Vineet Nigam, the assistant general manager of ICRA.

The overseas funds are also seen booking profit this time around; this, is likely to pull prices down.

"Gold is likely to witness support at the level of $452-455 an ounce. However, after a fortnight we expect prices to rise again, before seeing a dip in mid-December," said Si Kannan, an analyst with Sharekhan Commodities.