Despite Phenomenal Price Hike, Gold Continues To Lure Indian Investors

Interestingly, a duty cut in July sparked a revival in jewellery demand, marking the strongest third quarter for the sector since 2015, and leading to record levels in bar and coin purchases. As Dhanteras and wedding season fuel fourth-quarter demand, India’s gold market is on track for one of its strongest years, with annual totals nearing a four-year high

Gold has been gaining traction as investment option - up over 40 per cent in volume and 83 per cent growth in value terms. Interestingly, it is happening at a time when gold price has gone out of the roof.

Talking to Bizz Buzz, Fatehchand Ranka, president, Maharashtra Rajya Saraf Suvarnakar Federation said, “The gold price (per 10 gram) has gone up to Rs 80,000 at present, from Rs 65,000 a year ago, a rise by over 20 per cent. Still, the demand of gold continues to rise due to several factors, significant among them being devaluation of Indian currency and ongoing geo-political tensions.”

Citing the reason behind the price rise of the yellow metal, he said that it was due to the fact that mining of gold cost has gone up due to deep mining these days. Ranka believes that the gold demand at the current level will continue at least until the end of the calendar year.

The World Gold Council’s Q3 2024 report reveals that total gold demand increased 5 per cent year-on-year to 1,313t, a record third quarter.

Darpan Anand, Managing Director, Punjab Jewellers in Indore, said, “Normally, it has been observed that investment in gold and gold jewellery goes down whenever there is a price hike in gold. However, a reverse trend was seen this year as people continued to trust more in gold rather than any other high-value commodity.”

Sharp cut in gold import duties in July sparked a revival in jewellery demand, which posted its strongest third quarter since 2015 with 10 per cent increase to 171.6 tonnes as compared to 155.7 tonnes in Q3 2023. Momentum in consumer demand picked up sharply in late July and remained strong until the mid-September. There was sharp 41 per cent increase in investment demand to 76.7 tonnes in comparison to 54.5 tonnes in Q3 2023. Bar and coin demand in India jumped to its highest third quarter since 2012. Investor optimism and bullish price expectations were accelerated by the July duty-led price correction, which allowed many investors to enter the market.

Sachin Jain, Regional CEO, India, World Gold Council said, “India’s gold demand in Q3 2024 witnessed an 18 per cent year-on-year increase touching 248.3 tonnes.”

There was robust rise of 87 per cent in gold imports in Q3 2024 to 360.2 tonnes, compared to 193 tonnes in Q3 2023. Flows of smuggled gold into India all but disappeared thanks to the duty cut. Moreover, India’s and recycling increased by 22 per cent to 23.4 tonnes compared to 19.2 tonnes in the corresponding period last year. Another consequence of the duty cut was selling by gold loan companies, which auctioned some holdings following the rupee-denominated fall in gold in order to limit losses from the non-performing loans.

India’s gold demand remains solid in the fourth quarter due to Dhanteras and wedding demand, although with the continued rise in the gold price offsetting the impact of the duty cut, we may see an increased trend for investors to wait for price corrections as opportunities to add to their holdings. Nevertheless, India is on course for a very strong year, as year-to-date investment is already approaching the annual totals of the past four years.

World Gold Council (WGC) expects full year gold demand to be in the range of 700-750 tonnes.

♦ Total gold supply increased five per cent y-oy, with a jump of 6 per cent in mine production and an 11per cent rise in recycling.

♦ Demand for gold in India for Q3 2024 was at 248.3 tonnes, which rose by 18 per cent as compared to overall Q3 demand for 2023 (210.2 tonnes).

♦ India’s Q3 2024 gold demand value was Rs 1,65,380 crores, up by 53 per cent as compared to Q3 2023 (Rs 1,07,700 crores).

♦ Total Jewellery demand in India for Q3 2024 increased by 10 per cent to 171.6 tonnes as compared to Q3 2023 (155.7 tonnes).

♦ The value of jewellery demand was Rs 1,14,300 crores, up by 43 per centfrom Rs 79,830 crores recorded in Q3 2023.

♦ Total Investment demand for Q3 2024 at 76.7 tonnes increased by 41 per cent in comparison to Q3 2023 (54.5 tonnes).

♦ In value terms, gold Investment demand in Q3 2024 was Rs 51,080 crores, up by 83 per cent from Q3 2023 (Rs. 27,940 crores).

♦ Total gold recycled in India in Q3 2024 was 23.4 tonnes, up by 22 pe cent compared to 19.2 tonnes in Q3 2023.

♦ Total gold imports in India in Q3 2024 was 360.2 tonnes, up by 87 per cent compared to 193 tonnes in Q3 2023.