Gold appears to be losing its allure in India amid rising prices, according to a recent report by the World Gold Council (WGC). The report indicated that gold demand in India during the April to June 2024 quarter was 149.7 tonnes, a 5% decline compared to 158.1 tonnes in the same period the previous year.
In value terms, however, gold demand during this quarter stood at Rs 93,850 crore, marking a 14% increase from Rs 82,530 crore in the previous year’s corresponding period.
“India’s gold demand softened slightly in Q2-CY24. This can be attributed to record high gold prices impacting affordability and causing a slowdown in consumer purchases. However, the overall value of demand remained strong, increasing by 14%, highlighting gold’s enduring value for Indian consumers,” said Sachin Jain, regional chief executive officer for India at the World Gold Council.
Gold prices surged 18% year-on-year (YoY) in the June 2024 quarter to $2,338.2 an ounce, reaching a record high of $2,427 per ounce during the quarter. This marks a nearly 13% increase compared to the December 2023 quarter.
Jewelry demand in India also faced the brunt of high prices, dropping 17% to 107 tonnes due to elevated local prices, the general election, and a severe heatwave. This quarter marked the weakest second quarter since the COVID-stricken Q2-CY21, according to the WGC.
While festivals such as Akshaya Tritiya and Gudi Padwa provided a temporary boost, record-high prices continued to dampen consumer sentiment, WGC noted. Conversely, investment demand surged by 46% to 43.1 tonnes, the highest second-quarter level since 2014, driven by expectations of further price appreciation and safe-haven buying.
Looking ahead, the recent 9% reduction in import duty on gold in the Budget 2024 is expected to revive gold demand in the July quarter, ahead of the main festive season starting in September, potentially boosted further by a healthy monsoon.
“India’s economic outlook remains positive, with strong GDP forecasts and a rural sector recovery likely to support demand in the second half of the year. Our forecast for full-year demand is between 700 to 750 tonnes,” the WGC stated.
Global Perspective
Globally, gold demand (excluding OTC) dropped 6% YoY to 929 tonnes as a sharp decline in jewelry consumption outweighed minor increases in other sectors.
Global jewelry volumes fell 19% YoY to a four-year low of 391 tonnes in the June 2024 quarter. Central banks increased their gold purchases by 6% YoY to 184 tonnes, driven by the need for portfolio protection and diversification, according to the WGC.
Retail bar and coin investment decreased by 5% to 261 tonnes in the June 2024 quarter, primarily due to weak demand from Western markets. However, gold demand from the technology sector jumped 11% YoY, spurred by the ongoing artificial intelligence (AI) trend.