Despite record-high gold prices, demand for jewelry, bars, and coins remained robust in India, according to the World Gold Council (WGC).
Domestic gold prices were trading at par with international prices or even at a slight premium in India around the peak festival season in late October, the council said in a commentary. This reflected a higher level of demand in the country.
India is the top consumer of gold with China.
Kavita Chacko, research head, India, WGC:
The average monthly discount narrowed from US$5/oz in September to US$2.8/oz in October, before tapering to US$1/oz in the first week of November.
Source: WGC
Festive buying supports gold
WGC said despite record prices, consumer buying during Diwali remained strong in both jewelry, bars, and coins.
Markets and media reported higher footfall at jewelry stores and robust buying of coins via online as well as offline platforms, WGC said.
“The price increase since Diwali 2023, has enhanced consumer sentiment, positioning it as a long-term investment. And volatility in domestic equity markets, coupled with rising international prices, has added to gold’s investment appeal,” Chacko said.
Reports suggested that auspicious “token” purchases were rather broad-based, spanning regions and demographics.
“Despite a y/y drop in the volume of gold sold, the value of sales increased, driven by the higher price,” WGC said in the report.
Consistent demand for gold ETFs
Indian investors increased investments in gold exchange-traded funds with strong inflows in October.
WGC said favorable gold price momentum and volatility in equity markets fuelled demand for gold ETFs.
“From July to October monthly average net inflows into Indian gold ETFs reached INR15.4bn/US$183mn, a significant increase from the average of INR5.3bn (~US$63mn) in the first half of the year,” according to the WGC report.
According to the Association of Mutual Funds in India (AMFI), October saw record net inflows of INR19.6 billion ($233 million), pushing the total assets under management (AUM) for Indian gold ETFs to a new high of INR445 billion ($5.3 billion).
Source: WGC
This represented a year-on-year increase of 70% and a month-on-month rise of about 12%.
Over the first 10 months of 2024, total net inflows into ETFs reached $1.11 billion, higher than $301 million during the same period last year.
RBI adds 28 tons of gold to forex reserves
The Reserve Bank of India added about 28 tons of gold to its foreign exchange reserves in October, according to data from the central bank and WGC.
Total purchases by RBI this year stood at 78 tons. Total gold reserves with RBI were at 882 tons.
Source: WGC
This makes it the second-highest annual net gold purchase by the RBI, after the 257 tons purchased in 2009. In value terms, gold represented 10% of India’s foreign exchange reserves, the highest share since 1999, the WGC said.
Chacko said in the report:
Alongside this expansion the RBI has focused on holding its gold reserves domestically and has reduced the amount kept in safekeeping with the Bank of England and the Bank for International Settlements (BIS).
As of September 2024, 60% of the RBI’s total gold reserves, equivalent to 510t, were held domestically, an increase of 102 tons since March 2024.
This marks a significant rise from the 38% held in domestic storage in March 2023, according to WGC.
India’s gold imports rise
Last month, India’s gold imports rose $7.13 billion from $4.39 billion in September. This reflected a seasonal uptick in demand from festivals and weddings.
According to WGC’s estimates, the volume of imports was approximately 90-92 tons last month, significantly higher than 59 tons in September.
WGC said since the reduction in India’s import duty in July, monthly gold imports averaged around 95 tons, up from 50 tons earlier in 2024.
Through the first 10 months, gold imports by India have risen 21%, totaling $44 billion, with volumes remaining steady at around 635 tons, WGC added.
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