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Bangalore ā€“ Near-record prices of gold in top consumer India have depressed demand during the peak festive season, prompting jewelers to offer discounts and free gifts to boost sales.

Gold demand in India usually picks up in the second half of the year, as many people believe that buying it during key festivals such as Diwali brings prosperity. But this year, they have refrained from making any large purchases.

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A salesperson arranged bangles made of gold and other precious metals on the eve of the Hindu festival, Akshaya Tritiya

Consumer appetite for gold has been weak since the start of the year, with a higher import duty and a weak rupee pushing local prices to fresh highs.

These factors reduced India’s gold demand by more than a third during the first half of the year to 383.2 metric tons. Local gold prices have fallen modestly from their highs but remain elevated, at around 31,100 rupees ($588) per 10 grams.

India’s gold demand this festive season is likely to fall to 200-250 tons, according to industry executives.

Still, jewelers are hoping to recover some of the lost demand by attracting consumers with freebies.

Jewelry sales account for about 70% of total gold demand in India.

Demand has picked up marginally since Tuesday, said Ashish Pethe, partner at Waman Hari Pethe Jewellers, which has 11 retail outlets in Mumbai.

Some jewelers have started offering discounts of 15%-20% on production costs, while others are offering free gold and silver coins and lucky draws for cars and motorbikes.

“We expect the offers to attract more customers in the coming days,” said Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade Federation.

But analysts are skeptical whether these sales promotions will really increase gold consumption significantly, as people are still reluctant to make large purchases at current prices.

All these sales promotions won’t generate any large fresh demand but will instead only divert buyers to retailers who are offering better gifts, said Kishore Narne, senior vice president at Anand Rathi Commodities.

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