India's Love of Gold Turn Faux

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"Almost 50% of gold jewelers have opened imitation jewelry showrooms."

Imitation gold jewelry is flying off the shelves in Mumbai. With gold prices testing multiweek highs, physical demand for gold has taken a beating; consumers are opting for lower-carat gold jewelry and 1-carat gold costume jewelry.

On August 24, as India celebrates Raksha Bandhan, a festival which celebrates the bond of affection between brothers and sisters, imitation gold jewelry appears to be ruling the day.

"We had hoped that the demand for gold jewelry would see a major spike during this time, as brothers and sisters buy gold jewelry as gifts for their siblings," said Harish Motilalwala, a leading gold jeweler in a Mumbai suburb. "However, the price of gold has risen by 25% in the past seven months. This is keeping many youngsters away from the pure stuff, and people are buying 12-carat or imitation gold jewelry at cheaper prices," he added.

In India, gold has a significant purpose on a day when siblings pray for each others' well being. The demand slump does not augur well for the festive season ahead, traders maintained. They added that demand for gold jewelry, even among ethnic Indians, has slumped with consumers buying imitation and costume jewelry.

On Monday (August 23), though gold prices declined slightly per 10 grams in Mumbai, snapping the 6% jump over the past three weeks, consumers stayed away. Given that the price of gold continues to test an all-time high, many jewelers in Mumbai have taken to increasing the component of studded jewelry in their showrooms against stocking plain, gold jewelry. They point out that poor demand for 22-carat jewelry has caused most jewelry manufacturers to close shop in Mumbai.

"Almost 50% of gold jewelers have diverted and opened imitation jewelry showrooms. It makes pure business sense, said Vasant Bhanushali, a Mumbai gold and diamond trader.

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