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Informist, Thursday, Dec. 19, 2024

 

MUMBAI – Jewellery demand in India may see short-term pressure due to the commencement of an inauspicious period for gold purchases, but investment demand is expected to remain supportive, said Kavita Chacko, World Gold Council research head (India), in a report 'India Gold Market Update' Thursday. Jewellery demand has been lacklustre as fluctuating gold prices kept consumers on the sidelines despite the start of the wedding season, she added.

 

The month-long Kharmas, from Dec. 15 to Jan. 14, considered inauspicious during which Hindus refrain from buying gold and no wedding takes place in most parts of India, weighed on jewellery demand. However, there are expectations of some demand for holiday purchases, particularly from non-resident Indians visiting the country during this period, she said.

 

Physical investment demand in yellow metal has shown steady growth, with anecdotal reports indicating strong sales of gold bars and coins. "The positive sentiment around gold prices and its appeal as an investment asset have likely supported this trend, which is expected to continue," Chacko said.

 

In the domestic market, the yellow metal traded at a premium to international prices for most part of November. "This shift was likely influenced by a rise in investor demand as gold prices weakened," the report said. 

 

The decline in gold prices last month was due to rising US Treasury yields, a firm US dollar, moderating inflation concerns, and a slowdown in market momentum following the US Presidential elections. The yellow metal prices dropped 4% from the October peak to $2,670 an ounce.

 

Indian gold exchange traded funds inflows remained strong and surpassed the average monthly inflow for 2024. The continued positive sentiment towards gold, coupled with volatility in domestic equity markets, likely fuelled these inflows, even as major global markets experienced outflows, she said.

 

The council estimates India imported approximately 170–180 tonnes of gold in November. The country's imports in the first 11 months of 2024 exceeded 800 tonnes against 689 tonnes in the same period a year ago. However, the council is having active conversations with local gold industry stakeholders to understand if the drivers of spikes were accurate. 

 

The Reserve Bank of India's gold reserves rose 8.4 tonnes to 876 tonnes in November, up 9% on year. The central bank has bought gold for 11 successive months and the average monthly purchase stood at 6.6 tonnes in 2024. In value terms, gold now accounts for 10.2% of total foreign exchange reserves, up 7.8% on year, Chacko said. However, WGC lowered RBI's gold purchase in October by 14.2 tonnes.

 

Net inflows in November were $149 million, higher than monthly inflows of $115 million in 2024. The total assets under management for Indian gold ETFs rose to $5.2 billion, up 60% on year. The net inflows in gold ETFs during the first 11 months of 2024 reached $1.27 billion, a 3.7-fold jump from last year.

 

Indian mutual funds' gold holdings reached 54.5 tonnes, having added 12.2 tonnes so far in 2024. End

 

US$1 = INR 85.07

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Sandeep Sinha

Edited by Akul Nishant Akhoury

 

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