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Informist, Saturday, Jan. 18, 2025

MUMBAI – Despite a price moderation in November and December, gold has emerged as the top performing asset in India in terms of returns, with prices gaining 21% on year in 2024, said Kavita Chacko, World Gold Council research head (India), in a report released Friday. However, gold's return in rupee was lower than its 26% return in dollar terms, Chacko said.

Gold has started this year on a strong note, rising 2.7% to $2,679 per ounce as of Jan. 10, partly recouping the losses of the previous two months as global uncertainties continue to support prices, she said.

Gold prices declined 2% in December, after a 4% fall in November, and closed at $2,610 per ounce, mainly because of a strong rally in the dollar. However, persistent and growing geopolitical risks and a positive trend in global gold exchange-traded funds limited the losses, she said. On the domestic market, gold closed 0.4% lower at INR 76,328 per 10 grams in December, she added.

Gold buying has primarily been wedding related as consumers have mostly been hesitant about buying gold jewellery due to high and fluctuating prices and the inauspicious period in the Hindu calendar from mid-December to mid-January. "But anecdotal market reports tell us that physical investment demand for bars and coins has been sustained, emphasising gold's investment appeal," Chacko said.

Indian gold ETFs experienced their eighth consecutive month of net inflows in December. However, net inflows were at their lowest level since June. The decline in gold prices during the month likely impacted the momentum seen previously, she said. 

Net flows into gold ETFs in December were INR 6.40 billion, down nearly 50% from INR 12.57 billion in November, according to data released by the Association of Mutual Funds in India. The inflows were 32% lower than the average monthly inflows of INR 9.4 billion for the year, the report said. In addition, three new gold ETFs were launched in India in 2024, bringing the total number of physically-backed funds available in the local market to 18.

"The strong momentum in gold prices, global uncertainties, favourable tax revisions in the Union Budget in July, volatility in domestic equity markets, and the inherent transparency, liquidity and ease of transactions have collectively driven investor interest towards ETFs," Chacko said.

The Reserve Bank of India paused its gold buying in December after 11 months of purchases. The central bank accumulated 72.6 tonnes of gold in 2024, bringing its reserves to 876 tonnes, Chacko said. "The RBI was the second-largest buyer of gold among central banks in the first 11 months of 2024. Gold now makes up 10.6% of the RBI's forex reserves, a noteworthy rise from 7.7% a year ago," Chacko added.

Gold imports by India in Apr-Nov saw a correction of $12 billion. The revision has been attributed to double counting during the migration of data between two platforms, Chacko said. The sharpest revision, of $5 billion, occurred in November, although imports remained sizeable that month at 117 tonnes. 

Overall, the volume of gold imported in 2024 was slightly lower than the previous year, although the value of these imports increased 21% to $52 billion, reflecting the gold price. "Based on the latest available data, we estimate the total import volumes for the year to be approximately 724 tonnes compared with 744 tonnes in 2023," Chacko added.  End

US$1 = INR 86.61

Reported by Ashutosh Pati

Edited by Tanima Banerjee

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