Light. From a scientific point of view, it is an electromagnetic radiation. But light is also an illumination. Knowledge and learning. Or, sunshine. As an archetypal and intuitive perception, light fascinated people all over the world, including India.

Indeed, Diwali – the festival of lights – is one of the most significant festivals in Indian culture. It lasts five days, usually between mid-October and mid-November, during which millions of Hindus, Sikhs and Jains celebrate the triumph of light over darkness, good over evil, and knowledge over ignorance. The festival coincides with the new year according to the Vikrama calendar and it is a time of visiting, exchanging gifts, gambling, feasting, wearing new cloths and, of course, setting off large firework displays. 

Diwali and Gold

What is the best gift in Indian culture? Well, gold is always an excellent choice. This is why we see boosted consumer spending during Diwali (just like during Christmas in Western culture). Another reasons for this elevated economic activity is that Diwali is a time when households purchase new goods – after all, it’s a new year, a new beginning – such as furniture, clothing, or gold. You see, the festival is dedicated to Lakshmi, the goddess of wealth – so it is auspicious to buy some gold, the ultimate symbol of prestige and wealth. 

This is why Diwali purchases of gold add additional demand for gold, supporting the bullion prices in the local Indian markets. However, they do not affect the international gold prices significantly, which are set in the London gold market and in the New York gold market (Comex). Please take a look at the chart below – as one can see, the monthly gains in gold prices during Diwali months are rather disappointing. Actually, on average, gold lost its value during them over the last five years.

Chart 1: Monthly percent changes in gold prices (London P.M. Fix) from October 2014 to November 2018.

Monthly percent changes in gold prices (London P.M. Fix) from October 2014 to November 2018

Consequently, there are many factors that may influence the price of gold that will be useful for investors and traders, but it seems that the Diwali’s impact on gold price is not one of the important ones.