Gold demand in India to perk up despite slow start to year

India may see strong demand for gold this year despite potentially subdued jewelry sales in the January-to-March quarter, the World Gold Council (WGC) said.

Last year, demand for gold jewelry slid 6% when compared with the previous year to 562 tons. Investment demand, however, rose by 7% to 185.2 tons, data showed.

Gold demand in India, which has been stuck in the 700-to-800 metric tons range for the past five years is expected to break free and swing to the 800-to-900 range this year, Somasundaram P.R., chief executive of WGC’s India operations, said.

Somasundaram said strong economic growth and people adapting to higher prices are creating a new standard for how much people buy and use.

Investments in Indian bars and coins grew 7% year-on-year to reach 185 tons in 2023. Fourth quarter demand of 67 tons was 64% above the five-year quarterly average, data showed.

Last year, demand for gold in India saw a 3% decline, reaching 747.5 tons, the lowest since 2020, largely attributed to record-high prices.

Specifically, gold consumption in the October-to-December quarter dropped by 4% to 266.2 tons on a decline in jewelry demand, despite increased sales of coins and bars for investment purposes. Consumers in India face a 3% goods and services tax (GST) on gold purchases.

Net gold imports last year were 20% higher than the previous year at 780.7 tons, primarily on building of substantial inventory by traders.

In final quarter of last year, local consumption of gold stood at 266.2 tons, down by 4% from a year ago. Total jewelry demand in the fourth quarter of 2023 was down by 9% y-o-y at 199.6 tons.

Total investment demand in the December quarter stood at 66.7 tons, an 18% increase from Q4 of 2022. However, gold recycled in India in Q4 was down by 16% y-o-y.

The Reserve Bank of India (RBI) added 16.2 tons of gold to its reserves in 2023, following 32 tons in 2022. Investments in bars and coins saw a 3% decline, offsetting strength in some markets. Leading gold suppliers to India include Switzerland, the United Arab Emirates, Peru, and Ghana.

In 2023, the People’s Bank of China and the National Bank of Poland added the most gold to their reserves, while the Central Bank of Uzbekistan and the National Bank of Kazakhstan were the largest sellers, the WGC report said.

On a global scale, gold demand reached 4,699 tons in 2022, with global gold exchange-traded funds seeing a third straight annual outflow, losing 244.4 tons.

Demand in European markets plummeted by 59% y-o-y, but this decline was offset by a strong post-Covid recovery in China, with annual demand increasing by 28% to 280 tons, along with increases in India (185 tons), Turkey (160 tons), and the US (113 tons).