Dhanteras-Diwali Sparkles: Gold and silver shine bright
Gold imports are surging to cater to festive demand and have been added by sharp duty cuts in this year's budget. Central banks, including RBI, are also propping up demand for gold as they bulk up reserves in an effort to diversify their reserves. The metal is still serving as a safe haven, with economic data from advanced economies not offering investors clarity on the extent of economic slowdown.
Geopolitical tension is also adding to the allure of bullion. Add to all this, the festive season demand in the world's top gold importing economies — China and India — and the trajectory for gold prices seems to be defined fairly well.
Silver offers an even bigger upside, with imports being pushed up by demand from solar panel and electronics manufacturers. Imports have shot up after duty cuts and are on course to double from a year ago, with industrial buyers stockpiling silver in anticipation of higher prices.
The white metal is exerting pressure on prices of the yellow metal, with investors expecting it to yield higher returns than gold. As and when gold does pause for breath, the relentless rise in silver is ensuring the pause is shortlived. If the US Federal Reserve slows the pace of its interest rate cuts, silver is seen gaining on gold.
Uncertain consumer demand in prime markets such as the US and China is affecting India's jewellery exports.
Duty cuts on bullion earlier in the year were partly intended to unblock capital in a key export industry, and there may be need for additional government intervention. Although exports of gold jewellery are holding up, silver and diamond ones are struggling. Gold jewellery exports are benefiting from India's bilateral trade agreement with the UAE.
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