Despite the high rate, India’s demand for gold increased by 8% between January and March to 136.6 tonnes

Despite prices hitting all-time highs, India’s demand for gold increased by 8% yearly to 136.6 tons in the March quarter, aided by a robust economy, as reported by the World Gold Council.

The Reserve Bank of India’s (RBI) aggressive gold purchases also fueled an increase in demand.

During the January-March period of this year, India’s demand for gold increased by 20% on an annual basis to Rs 75,470 crore due to both volume growth and an 11% increase in quarterly average pricing.

The World Gold Council (WGC) published its worldwide study titled “Gold Demand Trends Q1 2024” on Tuesday. It revealed that India’s overall gold demand—which includes investment and jewelry—rose from 126.3 tonne at the same time last year to 136.6 tonne this year.

India’s demand for jewelry grew by 4% to 95.5 tonne from 91.9 tonne of the overall gold demand. The overall demand for investments (in the form of coins and bars, among other things) increased by 19% to 41.1 tonne from 34.4 tonne.

The growing demand for gold, according to Sachin Jain, Regional CEO, India, WGC, “reaffirms Indians’ enduring relationship with gold.”

He went on, “India’s sustained robust macroeconomic climate supported the country’s consumption of gold jewelry, despite the fact that prices hit a record high in March and sales had slowed by the end of the quarter.”

According to Jain, the demand for gold in India is expected to be between 700 and 800 metric tons this year.

He said that the demand may be at the lower end of this range if the price surge continues. The nation’s demand for gold in 2023 was 747.5 tons.

When asked what factors contributed to the surge in demand between January and March, Jain told PTI that historically, eastern markets—including those in China and India—respond to price fluctuations and declines in price, whereas western markets do the opposite.

“This is the first instance of a total reversal in the way that the Indian and Chinese markets have reacted to a rise in gold prices,” he said.

According to Jain, there has been an increase in demand for both jewelry and investment goods like bars, coins, and ETFs.

“The RBI’s purchases have been the second cause of the increase in demand,” he said.

According to Jain, the RBI acquired 16 tonnes of gold in total in 2023, but it has already bought 19 tonnes in the first quarter of this year.

The RBI has signaled that it would keep purchasing, he noted.

When asked about the demand forecast for the April–June quarter, Jain said that the prolonged election process and the recent spike in gold prices might cause it to slow down.

India’s gold demand increased by 20% in value terms to Rs 75,470 crore from Rs 63,090 crore, according to WGC statistics.

Among this, the demand for jewelry increased by 15% to Rs 52,750 crore from Rs 45,890 crore, while the demand for gold investments increased by 32% to Rs 22,720 crore from Rs 17,200 crore.

The WGC also said that from January to March, 38.3 tonnes of gold were recycled in India, a 10% increase from 34.8 tonnes in Q1 2023.

According to the Council, “India imported 179.4 tonnes of gold in Q1 2024, up 25% from 143.4 tonnes in Q1 2023.”

In Q1 2024, the average quarterly price (excluding import duty and GST) for 10 grams of gold was Rs 55,247.20, compared to Rs 49,943.80 in Q1 2023.

“Q1’24 again saw robust demand for gold bars and coins in India, with 19% year-over-year growth to 41 tonne. According to Jain, this was comparable to Q1’22, which was also the best first quarter since 2014.

According to him, investors’ curiosity was piqued by the price fall in February, and their expectation of a comeback drove buying.

According to Jain, “investors remained bullish as the price rallied to successive record highs, contributing to the robust demand.”

Positive inflows of more than two tons were also seen in gold ETF investments.

“Recycling volumes in India rose by 10% to 38.3 tonne in Q1’24, but there were very few reports of distressed sales.” Jain observed that there doesn’t appear to be much of a desire to profit from the current high gold prices given the robust economy and forecasts of a regular to excellent monsoon.

According to him, demand may be momentarily strained by the present high prices of gold.

Jain countered that “strong cultural and seasonal factors, such as festivals and weddings, coupled with solid economic growth and expectations for a better monsoon, would support demand.”