India’s gold jewellery demand is expected to have gradually recovered from the middle of January after remaining subdued since December, the World Gold Council said.
The recovery in demand is likely to be primarily on the back of wedding purchases this month, the council said in a market update.
Gold was the best-performing asset class in India in 2024, with a 21% year-over-year gain, despite lower prices in November and December.
However, the return in Indian rupees was lower than the 26% return in US dollars, WGC said.
In an interview with Invezz earlier this month, Prithviraj Kothari, the managing director of RiddiSiddhi Bullions, said demand for gold jewellery in India is likely to remain subdued for the upcoming months.
However, he expects a seasonal boost during the festive and wedding periods.
Subdued jewellery demand since December
The high and fluctuating gold prices and the inauspicious period in the Hindu calendar from mid-December to mid-January have made consumers hesitant to purchase gold jewellery.
Kavita Chacko, research head, India, WGC, said:
Buying has primarily been wedding-related. But anecdotal market reports tell us that physical investment demand for bars and coins has been sustained, emphasising gold’s investment appeal.
The difference between domestic and international gold prices illustrated the weak demand.
Domestic gold prices in India have been lower than international gold prices since December.
Source: RBI
This discount has averaged US$4 per ounce, and has recently increased to US$15 per ounce, according to WGC.
ETFs maintain positive flows
In December, net inflows into Indian gold ETFs continued for the eighth month, but were at their lowest since June 2024.
“The decline in gold prices during the month likely impacted the momentum seen previously,” Chacko said.
However, investor demand continued to be supported by the ongoing volatility in equity markets and the generally bullish sentiments around gold, she said.
Net inflows for gold ETFs in December were 6.4 billion rupees ($75 million), according to the Association of Mutual Funds in India (AMFI).
Source: RBI
This represents a nearly 50% decrease from November and is 32% lower than the average monthly inflow of 9.4 billion ($112 million) for the year.
“These figures are close to our initial estimates, which were based on information available at the time,” Chacko added.
Net inflows into gold ETFs reached a record high of 112 billion rupees ($1.3 billion) in 2024, almost four times the previous year, demonstrating a surge in investor demand.
The overall number of physically-backed gold ETFs available in the Indian market increased to 18 in the past year, due to the introduction of three new funds.
The strong momentum in gold prices, global uncertainties, favourable tax revisions in the Union Budget in July, volatility in domestic equity markets, and the inherent transparency, liquidity and ease of transactions have collectively driven investor interest towards ETFs.
RBI pauses gold purchases in December
The Reserve Bank of India halted its gold purchases in December, after 11 months of accumulation.
In 2024, the RBI added 72.6 tons of gold to its reserves, bringing the total to 876 tons, according to WGC data.
Source: RBI
“The 2024 acquisition marks a significant increase on the 16.2t bought in 2023 and ranks as the third highest annual purchase since 2001,” Chacko said.
In the first eleven months of 2024, the RBI was the second largest purchaser of gold among central banks, and gold now comprises 10.6% of the RBI’s forex reserves, significantly increasing from 7.7% in the previous year.
“This increased share highlights the RBI’s efforts to diversify its forex reserves into various assets, particularly gold, which is seen as a hedge against external uncertainties and challenges,” according to WGC.
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