Due to high prices, India’s demand for gold drops by 3% to 747.5 tons in 2023; the World Gold Council remains optimistic
In 2023, India experienced a 3% decline in gold demand, totaling 747.5 tonnes, according to the World Gold Council. However, an anticipated surge in demand between 800-900 tonnes in 2024 is likely if gold prices remain stable. The previous year, in 2022, the country’s gold demand was 774.1 tonnes, as reported in the World Gold Council (WGC) Gold Demand Trends for 2023.
The decrease in 2023 was attributed to rising gold prices, influencing consumer interest. Although consumer enthusiasm remained strong, it lagged behind trade sentiment. Notably, a price correction during Navratri in October led to increased consumer response, boosting Diwali sales in November. However, December saw a decline as gold prices resumed an upward trend, resulting in a 9% drop in fourth-quarter jewelry demand compared to the same period in 2022, according to Somasundaram PR, WGC Regional CEO for India.
Gold prices exhibited volatility throughout 2023, reaching new highs both in the domestic market and globally. The precious metal peaked at Rs 61,845 per 10 gm on May 4 in the domestic market and USD 2,083 an ounce globally. This trend continued, with another high of Rs 61,914 per 10 grams on November 16.
Looking ahead to 2024, positive economic conditions could favor India’s gold demand, potentially experiencing a substantial increase between 800-900 tonnes if prices remain steady. The subdued demand range of 700-800 tonnes since 2019, influenced by rising prices, increased duties, stock market outperformance, near-term elections spending impact, and acceptance of elevated price levels, hints at the potential for a surge in demand in the near future. However, short-term obstacles could arise from sharp price hikes and volatility triggered by global factors.
The report highlighted a 6% decline in total jewelry demand in India to 562.3 tonnes in 2023 compared to 600.6 tonnes the previous year. Concurrently, total gold investment demand in the country grew by 7% to 185.2 tonnes, with bar and coin investment rebounding by 7% to 185 tonnes year-on-year. The fourth quarter witnessed a demand of 67 tonnes, 64% above the five-year quarterly average.
The correction in gold prices prompted robust investment responses in the third and fourth quarters, supported by increased interest from physically backed gold ETF investors, resulting in a record 42 tonnes in total holdings in Indian-listed products by year-end, according to Somasundaram.
Recycling saw a 20% increase due to low and supportive higher prices, reaching 117 tonnes, considered the normative expected level. Gold imports to India in 2023 totaled 780.7 tonnes, a 20% increase compared to 650.7 tonnes in 2022. Net gold imports also surged by 20% in 2023, primarily due to substantial inventory building by the trade. In 2024, gold imports are expected to surpass demand, driven by Free Trade Agreements (FTAs) India has inked with many countries, further boosting gold imports.
