World Gold Council’s latest report bats for transparency, accessible banking, open traceability to improve domestic gold demand

The report also elaborated on the rapid growth in the working age population over the next two decades, which will create sustained demographic dividend

Mumbai: World Gold Council recently released their latest report titled ‘India’s Gold Market – Reform and growth’, summing up the various metrics of rising price and disposable income of India, and how that influences gold demand. The report emphasized more accessible banking, development of new export markets, legislative changes in gold mining, resolution of recycling traceability issues, and popularisation of Gold Monetisation Scheme to reduce India’s reliance on imported gold.

Over the years, government policies on gold have had widespread consequences such as the import duties and the 80:20 rule in 2013 and 2014 that pushed up the gold price premium in the local market, created uncertainty, and deterred potential gold buyers, mentioned the report. This spawned the unofficial market, and between Q3 2013 and Q4 2014, some 335t of gold was smuggled into India.

“The IMF forecasts that per capita GDP growth will increase 23% between 2022 and 2026. On the face of it, rising living standards benefit gold, but there are other factors in play: the country’s savings rate is declining, and the government’s ‘bank the unbanked’ initiative is creating a sea change in investment choice and availability,” said Juan Carlos Artigas, Global Head of Research, World Gold Council.

The report also elaborated on the rapid growth in the working age population over the next two decades, which will create sustained demographic dividend. Urbanisation and higher penetration of manufacturing and services sectors in rural areas, will improve income levels, thus increasing long-term gold demand. This phase will have to tackle lesser savings by households, while financial inclusion keeps providing alternate sources of investment beyond physical gold.

India’s gold market is most likely to benefit from positive demographic and socio-economic changes if the industry takes steps to become more transparent, more standardised and more in line with global peers, maintained the Council. The social and cultural transformations taking place in India should be underpinned by concerted efforts to provide easy access, and improve integrity and fungibility to reinforce trust in gold as an asset.