High gold prices and seasonal factors have dampened demand for gold jewellery, while demand for bars and coins remains strong
Mumbai: The World Gold Council (WGC) has reported a significant consumer shift from gold jewellery to gold bars and coins, driven by surging gold prices. This trend highlights gold’s growing appeal as a preferred investment asset.
High gold prices and seasonal factors have dampened demand for gold jewellery, while demand for bars and coins remains strong. “There hasn’t been significant distress selling or profit-taking, as consumers expect further price increases,” said Kavita Chacko, Head of Research, India, WGC.
The mid-May to July period is typically slow for jewellery purchases. However, a revival is expected with the upcoming festival season in Q3. Positive economic momentum and good monsoon progress are anticipated to boost demand in both rural and urban areas.
The discount on domestic gold prices compared to international prices, which ranged from US$1/oz to US$12/oz between mid-April and June, has widened sharply to as much as US$50/oz since early July. This is largely due to increased supply amid subdued domestic demand. Reports indicate a significant rise in imports of platinum alloy (over 80% gold content) from the UAE, taking advantage of lower import duties under the UAE-India Comprehensive Economic Partnership Agreement (CEPA).
Media reports reveal that 13 tonnes of platinum alloy were cleared by customs from mid-June to mid-July, surpassing the 9.9 tonnes imported during the same period in 2023.
In June, the Reserve Bank of India (RBI) significantly increased its gold purchases, acquiring 9.3 tonnes, the highest monthly purchase in nearly two years. In the first half of 2024, the RBI’s gold purchases totaled 37.1 tonnes, the highest since 2013. The RBI’s gold reserves now stand at a record 840.7 tonnes, constituting 8.7% of total foreign reserves, up from 7.4% a year ago.
Despite high prices and subdued jewellery demand, gold imports have remained steady, fluctuating between US$3.1 billion and US$3.3 billion from April to June. In volume terms, imports ranged between 42 to 46 tonnes. The gold import bill for June 2024 was 39% lower year-on-year, totaling US$3.1 billion, with volume estimates suggesting a 50% decrease to around 42 tonnes.
In Q2 2024, total imports amounted to US$9.5 billion, slightly lower than US$9.7 billion in the previous year, with a 23% decline in volume due to an 18% price increase during this period, Chacko noted.
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