At 21,000 tonnes, Indian households possess more gold than World Bank’s reserves, says WGC study

According to PR Somasundaram, MD of WGC India, the stocks may have reached 24,000-25,000 tonnes by now

Indian households are believed to possess approximately 21,000 tonnes of gold, maintaining their position as the world’s largest holders of the precious metal, according to the World Gold Council (WGC). Somasundaram PR, the managing director of WGC India, mentioned that a study conducted two years ago estimated the household gold stocks to be around 21,000-23,000 tonnes, but now they are likely to have reached 24,000-25,000 tonnes.

Approximately 40% of India’s nominal gross domestic product (GDP) in FY19 is represented by the value of the gold holdings mentioned earlier.

Increase in gold demand

As per the WGC, the predicted demand for gold in India in 2019 was slightly less than 760 tonnes, the figure for 2018. In the first quarter of 2019 (January to March), India experienced a 5% increase in gold demand to 159 tonnes, driven by factors such as the strengthening of the rupee and a decline in local gold prices.

On a global scale, gold demand increased by 7% during the same period. Despite recovering from a low point of 666 tonnes in 2016 following demonetization, India’s gold demand still falls short of the 963 tonnes recorded in 2010.

Upcoming quarter to see improvement

The upcoming July quarter is anticipated to witness an improvement in domestic gold demand due to traditional wedding season purchases and the Akshaya Tritiya festival. Additionally, the expectation of a normal monsoon this year bodes well for the rural economy and further boosts gold demand.

Government’s failed attempts to reduce physical gold consumption

While jewellery is expected to be the primary driver of Indian gold demand, the consumption of bars and coins is projected to be higher in 2019 compared to the previous year. Despite the government’s attempts to reduce domestic demand for physical gold through various means such as ETFs, SGBs, gold mining funds, gold fund of funds (FoF), and digital gold, the preference for physical gold remains strong and unaffected.

Despite offering interest rates ranging from 0.5% to 2.5% and providing exemptions from the capital gains tax, wealth tax, and income tax on value appreciation, the government’s gold monetization scheme (GMS) aimed at utilizing gold stored in lockers and cupboards has not gained significant traction.

Courtesy: News 18