21
2024/11
Wisunofx Market Update: India’s Gold Demand Poised for a New Surge!
With India entering its festive season and wedding peak, gold demand is expected to see another wave of growth. Despite recent record-high prices, the Indian market continues to demonstrate robust purchasing power, solidifying gold’s status as a long-term investment and a symbol of cultural tradition.
Kavita Chacko, Head of Research at the World Gold Council India, noted that even as gold prices hit historic highs during Diwali, demand remained strong. The appeal of gold as an investment supported vigorous sales during the festival season.
Highlights of India’s Gold Demand:
Festive Momentum: Diwali Boosts Gold Purchases
Chacko highlighted that Indian gold prices, which tracked international trends in October, saw slightly higher gains due to a 0.2% rupee depreciation and festive buying. Indian gold prices rose 5.5% in October.
While the U.S. dollar strengthened and bond yields rose after the presidential election, halting gold’s rally, both international and Indian gold prices have declined 8% since late October. However, gold remains one of the year’s best-performing assets, with returns of 17% year-to-date in rupee terms.
Key Drivers of Gold Demand in India:
1.Festivals:
Major celebrations like Diwali drive purchases of gold jewelry, bars, and coins, fueled by cultural traditions.
2.Wedding Season:
From November to March, the wedding season spurs demand, as gold is traditionally gifted as dowry or used in celebrations.
3.Investment Appeal:
Amid stock market volatility and resilient international gold prices, gold continues to attract investor interest as a safe-haven asset.
Gold ETF Growth and Central Bank Purchases:
ETF Inflows:
In October, India’s gold ETFs maintained stable demand.
2024 (YTD):
- $1.11 billion net inflows, up from $301 million in the same period last year.
- ETFs added 12.2 tons of gold this year, boosting total holdings to 54.5 tons (a 32% year-on-year increase).
Central Bank Holdings:
The Reserve Bank of India (RBI) significantly increased gold reserves in 2024, adding 28 tons in October alone, raising the year-to-date total to 78 tons.
Key highlights:
- RBI gold reserves reached 882 tons, reflecting a 10% growth in 2024.
- Gold now accounts for 10% of India’s forex reserves, the highest since 1999.
Additionally, the RBI has prioritized domestic storage of its gold reserves, reducing holdings with the Bank of England and the Bank for International Settlements. As of September 2024, 60% of RBI’s reserves (510 tons) are held in India, up from 38% in March 2023.
October Gold Imports:
India’s seasonal demand spurred higher gold imports in October:
- Value:$7.13 billion, up from $4.39 billion in September.
- Volume:90–92 tons, compared to 59 tons in September.
Since July’s import tax cut, average monthly imports have risen to 95 tons, significantly higher than the 50-ton monthly average earlier in 2024.
Outlook:
The upcoming wedding season (November–March) is expected to further elevate gold demand. If prices stabilize or correct slightly, consumers may find an attractive entry point, supporting continued bullish sentiment. Coupled with ongoing stock market volatility, gold’s safe-haven appeal is likely to sustain investor interest, setting the stage for a strong performance in the months ahead.
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