How Will Diwali Affect Gold Prices?

Over the last few years, demand for gold during the Diwali season has positively impacted gold prices, but what about now?

Gold prices have been on the upward trend again, and with Diwali on the horizon the yellow metal has no doubt been garnering interest.
Although the precious metal has yet to rise back to its post-Brexit prices, Diwali season has historically impacted gold prices in a positive way due to high demand.
However, a stronger US dollar—currently riding an eight-month high—has put pressure on the yellow metal, which is $1,266.70 an ounce. Not only that, ongoing speculations of the Federal Reserve raising interest rates has also impacted the gold prices.
Looking over to Diwali, Reuters noted demand for bullion is expected to pick up ahead of the festival season—a time where gold is a popular gift choice.
The publication noted that HSBC analyst James Steel said, “a recovery in physical demand provided the foundation for the rally that carried over into later trading.”
Furthermore, Steel added that gold investors haven’t been swayed by the negative impact on bullion as a result of a stronger dollar.
All that being said, earlier in October Reuters reported that India gold discounts dropped to a nine-month low on pick up in festive demand, with dealers selling discounts as low as $2 an ounce.
In an interview with CNBC Adrian Ash, head of research at BullionVault, said that gold prices in India have been tightened, but are on the way to rising back above global quotes.
As far as the upcoming festival season impacting the gold price, another analyst speaking with CNBC said Diwali will only slightly influence on the gold price.
“As heavy consumers, the festive seasons always tend to surge the demand, and considering the current low prices, this should increase the market activity and thus push the prices a little,” Mihir Kapadia, founder and CEO of Sun Global Investments, told CNBC.
Kapadia added the festival season isn’t likely to boost the prices by much as investors await the possibility of the interest rates being raised and stock markets making gains.
As the Feds are expected to meet next week, the Wall Street Journal noted officials are betting on interest rates increasing by December.
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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.