Dhanteras 2024: Should you buy gold this year despite soaring prices?

In India, we are approaching the gold rush period. We are talking about Dhanteras — the day amid Diwali celebrations when most Indians buy gold as a way to invite wealth and positive energy into the home.

However, this Diwali, the sheen might be a bit less as gold prices have touched record highs, hovering around Rs 80,000 per 10 grammes. It is only on Monday (October 28), a day before Dhanteras, that the price of the yellow metal dipped down and was trading at Rs 80,430 per 10 grammes, while the 22-carat variant, popular for jewellery, was priced at Rs 73,740 per 10 grammes.

This has prompted the question: Should we or shouldn’t we buy gold this Dhanteras?

In India, Dhanteras, also known as Dhan Trayodashi, marks the beginning of the five-day Diwali celebrations. This year the day falls on October 29.

Legend has it that a soothsayer predicted that the 16-year-old young prince, son of King Hima, would meet his untimely death on the fourth day of his marriage due to a snake bite. To prevent this from happening, his newlywed wife created a heap of all her gold and silver ornaments at the entrance of the rooms and lit many lamps around it. When Yama, the God of death, arrived at the prince’s doorstep in disguise as a snake, he was blinded by the brightness of the lamps and the jewellery. From that day onwards, it came to be celebrated as Dhanteras.

Another legend says that Dhanteras marks the birth anniversary of the Gold of Medicine or Ayurveda, Dhanavantari. It is said that it is on the day of Dhanteras that Lord Dhanvantari emerged from the ocean with a pot of amrita (nectar of immortality) during Samudra Manthana (churning of the ocean).

According to Hindu mythology, purchasing gold, silver, or any kind of utensils made of steel or brass helps to protect people from bad omens and removes negativity from life.

Different regions of the country have different approaches to Dhanteras, but the underlying theme is more or less the same, about wealth and well-being.

It is because of this that Dhanteras is a big day for jewellers. They make huge sales on this day as people across the country rush to buy the precious metal. On average, Dhanteras witnesses the sale of about 20-30 tonnes of gold across the country. As per data provided by the All India Jewellers and Goldsmiths Federation National, about 41 tonnes of gold and about 400 tonnes of silver jewellery and coins were sold in the country last year. In terms of value, the total turnover of gold, silver, and other items was estimated to be Rs 30,000 crore.

In recent times, gold is seeing highs; glittering highs. Last week, gold prices surged to a record-breaking high of $2,714.10 per ounce as uncertainty around the US elections and escalating tensions in West Asia drive investors toward safe-haven assets. On October 18, gold prices hit Rs 77,584 per 10 grammes in India.

On Monday (October 28), the price of gold saw a slight dip with 24-carat gold being priced at Rs 80,430 per 10 grammes, while 22-carat gold was priced at Rs 73,740 per 10 grammes.

According to analysts, this slight fall could be attributed to weak global cues. A Reuters report noted that gold prices weakened slightly owing to a firmer dollar.

Even silver, which is often bought during Dhanteras, saw a dip in prices on Monday. In cities such as Delhi, Mumbai and Kolkata, silver was priced at Rs 97,900 per kg, a fall from Rs 98,000 on Saturday.

Many gold jewellers note that because of the surge in prices, there might be a drop in gold sales on Dhanteras. Reports state that India’s leading jewellers expect gold demand to drop by 15-20 per cent this Diwali-Dhanteras as compared to last year same period, owing to the skyrocketing prices of the yellow metal.

Suvankar Sen, managing director and CEO of listed jewellery firm Senco Gold & Diamond told The Economic Times, “The price of gold is constantly heading northwards which is dampening the mood of the customers as the precious metal is pinching the pockets. At this price level, the demand for gold will drop by 15-20 per cent year-on-year.”

Jos Alukkas, which is a known jeweller in the south of India, is also expecting demand to be low this Dhanteras, coming down by 15-20 per cent.

But, experts note that despite the soaring prices of gold, Dhanteras would be a good time to buy the precious metal. Colin Shah, MD, Kama Jewelry, speaking to Business Standard said, “Dhanteras is the time when demand for precious metals like gold and silver is usually high. If one has a long-term investment horizon, then gold would be an ideal choice. Gold prices have been witnessing a price rise due to various factors, geopolitical tensions being the major one fuelling gold’s rally. Going forward, a low interest rate regime will likely support gold prices.”

The value of gold has also risen tremendously. A study by Motilal Oswal Financial Services Ltd shows that if you invested in gold during Diwali 2019, your returns would be more than 103 per cent today. This illustrates why gold is a good investment, especially during volatile times.

Moreover, from the last Dhanteras on November 10, gold prices have exponentially risen; from Rs 60,750 to around Rs 80,000 per 10 grammes. In 2024 alone, domestic gold prices have surged more than 23 per cent, outpacing the returns from equities.

Other experts also opine that Israel’s ongoing war with Hamas in Gaza and Hezbollah in Lebanon has also caused an atmosphere of caution, driving many investors to gold. The uncertainty around the US elections, scheduled for November 5, has also seen investors opting for gold.

It is noted that when geopolitical tensions rise, particularly during wartime, investors become more risk-averse. They fear that conflicts could negatively impact financial markets and economies worldwide. Owing to this, they seek refuge in safe assets like gold, which are historically viewed as secure investments.

Santosh Joseph, CEO of Germinate Investor Services, agreeing with others said: “Given the current global environment, it remains a good time to invest in gold.”