Gold jewelry is woven into the culture, traditions and religions of India. India is the largest gold jewelry consuming country in the world, followed by China and the Middle East.
Gold Jewelry consumption in India and China is set to have an impact on the gold price. This will, in turn, cause the price of gold jewelry to rise.
"Analysts believe the climb in the global gold price will be driven by strong jewellery sales from the burgeoning middle class in China and India", according to The Star Newspaper in Malaysia.
India has a demand of 800 tonnes of gold per annum for creation of gold jewelry. Of this 800 tonnes, two-thirds is imported .
Speaking to DNA Money, Varij Sethi, managing director, SB&T said, "Jewellery is one of the fastest growing and most profitable segments in the Indian retail space today."
As the middle class in India continues to grow, the demand for gold jewelry will also continue to grow. The Mumbai Mirror reported "Demand for gold jewellery, mainly from retail investors, was up 47 per cent in the second quarter of 2005 against the corresponding period of the previous year."
Peak Gold Jewelry Sales
Almost 60-70 per cent of gold jewelry is being sold during the wedding and festival season.
Tamil Nadu, Andhra Pradesh, Kerala and Karnataka account for 40 per cent of the 800 tonnes of gold consumption, according to Business-Standard.com
The biggest time of the year for gold jewelry sales in India starts in October during the festival season and climaxes in November during Diwali and the Wedding Season.
Diwali (Lighting of the Lamps) is the largest and most important festival in India,enjoyed by people of every religion, it can be compared to Christmas in popularity. Indian women buy gold jewelry to wear during this important festival.
The Wedding Season in India is the main time for gold jewelry buying as it forms an important part of Hindu marriages. Daughters are gifted gold from their parents as a security for their financial future. Throughout India and into Kashmir, gold has traditionally accompanied women into their marriage, securing their financial independence within the husband's family.
The Indian tradition of seeing gold jewelry as an investment in the wealth and future fortunes of their marrying daughters is one of the reasons why gold jewelry in India is usually 22 karat gold. The style of gold jewelry in India, its intricacy of design with the popular filigree technique of cutting detailed designs into the gold is another reason why 22 karat gold is used in gold jewelry design in India, as this technique requires the gold alloy to be soft enough to cut and carve.
The increase in the Gold Price at the end of 2005 and continuing into 2006 is already having an effect on the festival and wedding season in India. Many people are choosing to recycle their gold jewelry into new designs for the the festival season, rather than buy new gold jewelry. According to the World Gold Council, "Recycled gold now accounts for 30 per cent of gold consumption in India".
The rise in recycled gold could be partially due to couples buying gold coins as a wedding investment and then melting them down into jewellery for the wedding celebrations, GR Ananthapadmanabhan, managing director of GR Thanga Maligai told The Economic Times. He also believes the majority of Indians are reluctant to sell their gold: "Gold is not like an equity share. People tend to consult their family members before selling gold."
Gold Jewelry Loans
Many banks in India have loans for purchasing gold jewelry. These loans are generally targeted at the working woman between 18 and 55 years of age. That banks are willing to loan on gold jewelry is a reflection of the importance of gold jewelry in an Indian woman's economy and traditions.
The rise of India's wealth and the increase in numbers of Indians becoming middle class will hold well for the increase of gold jewelry demand in India which will, as India is the largest market for gold jewelry, have a large effect on the demand for gold jewelry worldwide.