India’s Gold Demand Bouncing Back to Pre-COVID Levels, Rises 47% in Sept Quarter: WGC

According to the World Gold Council (WGC), India’s gold demand has seen a 47% rise in the July-September quarter to 139.1 tonnes, following stround in economic activity and recovering consumer demand. Gold demand in India is leaping back to pre-COVID levels and going forward the outlook looks optimistic.

India’s overall demand stood at 94.6 tonnes during the September quarter of 2020, the WGC’s Q3 Gold Demand Trends 2021 report stated, including that in terms of value, India’s third quarter gold demand surged by 37% to Rs. 59,330 crore (US$ 7.92 billion), compared to Rs. 43,160 crore (US$ 5.76 million) last year.

Mr. Somasundaram PR,  WGC Regional CEO, India stated that “This reflects a mixture of low base effect and return of progressive trade and consumer sentiments. This is principally driven by what seems to be a firm grip on the pandemic with elevated vaccination rates and dropping infection rates, leading to a strong rebound in economic activity.”

Going ahead, imports might not be very substantial in the fourth quarter as little bit of stocking up for the festive season has previously taken place during the third quarter of 2021, he added.

“Looking forward with restrictions being steadily relaxed across the country, retail demand is surging to pre-COVID levels. With the forthcoming festive and wedding season, there is all the more excitement towards gold demand, and we expect it to be the busiest gold-buying time of year since the start of COVID,” stated Mr. Somasundaram.

He further stated that demand for digital gold has also enhanced manifold, innovative tech initiatives, tie-ups with digital gold and UPI platforms by prominent jewellers has created about a significant boost in volume of buyers and investors desiring online purchases.

“In coming months, rising commodity prices and logistical expenses are projected to enforce further pressures and the RBI has already adjusted its inflation expectations higher. Soaring inflation tends to drive gold demand. Gold is seen as a strong hedge against inflation and years of data supports this notion. While we have not made any estimate for the rest of the year, excluding any surprising twist in tale, we could see a strong spike in demand in the last quarter of 2021, and is probable to be one of the best quarters in a decade,” he added further.

As per the report, India’s total jewellery demand for the quarter under review grew by 58% to 96.2 tonnes, compared to 60.8 tonnes during the July-September quarter of 2020.

While in value, jewellery demand increased by 48% at Rs. 41,030 crore (US$ 5.48 million), as against Rs. 27,750 crore (US$ 3.70 billion) last year.

Total Investment demand for the third quarter increased by 27% to 42.9 tonnes, from 33.8 tonnes in the same quarter of 2020.

In value terms, gold Investment demand in July-September gone up 19% to Rs. 18,300 crore (US4 2.44 billion), from Rs. 15,410 crore (US$ 2.05 billion) last year, as mentioned in report.

However, the total gold recycled in India declined by 50% to 20.7 tonnes in the period under review, compared to 41.5 tonnes in the same period of last year.

Total net bullion imports, without taxes, in the third quarter surged by 187% to 255.6 tonnes, from 89 tonnes in the same quarter of 2020.

Mr. Somasundaram stated that “While gold jewellery and investment demand for bars and coins also raised in a quarter that tends to be seasonally muted due to monsoons and inauspicious periods like Pitru-Paksha when consumers stand back from buying gold. Softer gold prices have also created substantial consumer interest ahead of seasonal demand.

Gold prices during the third quarter averaged at Rs. 42,635 (US$ 569.78) per 10 grams, compared to Rs. 45,640 in the same quarter of 2020 and Rs. 43,076 (US$ 575.81) during the April-June 2021, he mentioned.

Trade activity saw during various buyer-seller meets and anecdotal feedback from makers suggest that the fourth quarter festive season could be the best in several years, with robust imports much ahead of the third quarter demand demand, he stated.

He said a 50% drop in gold recycling also emphasises solid consumer intent to hold gold instead of sell it, assisted by a robust institutional market for loan against gold that persists to expand.

---