Despite an 8% increase in gold demand in India during the March quarter compared to the previous year, recent surges in the price of the precious metal could significantly dampen consumption, potentially marking the lowest level in four years, according to the World Gold Council (WGC).
The WGC projects India’s gold demand for 2024 to range between 700 metric tons and 800 metric tons, with the figure likely trending towards the lower end if current price rallies persist, explained Sachin Jain, CEO of WGC’s Indian operations. This forecast marks a notable decline from earlier expectations, as the WGC had previously anticipated demand to reach between 800 and 900 tons for the year.
In 2023, India’s gold consumption experienced a slight dip of 1.7% compared to the previous year, totaling 761 tons. However, the domestic price of gold soared to a record high this month, reaching 73,958 rupees ($885.72) per 10 grams. Such a significant increase, surpassing 13% in 2024 alone, following a 10% surge in 2023, is impacting investment and jewelry demand, with the latter constituting three-quarters of total demand, Jain highlighted.
The January-March quarter saw Indian gold consumption rise by 8% to 136.6 tons, driven by a 19% increase in investment demand and a 4% uptick in jewelry demand, as reported by the WGC. However, scrap supplies surged by 10% to 38.3 tons during the same period, signaling some investors liquidating holdings amidst the price rally.
Traditionally, gold purchases during festivals hold cultural significance in India, but demand during this month’s Gudi Padwa festival was subdued due to record-high prices. Looking ahead, Jain anticipates moderate demand during the upcoming annual Hindu and Jain holy festival of Akshaya Tritiya.
Additionally, the Reserve Bank of India increased its gold reserves by 19 tons in the March quarter, surpassing last year’s net purchases of 16 tons, according to the WGC. This suggests continued interest and confidence in gold as a reserve asset amidst evolving market conditions.