Gold price rally dims domestic jewellery demand, says WGC's Chacko
This story was originally published at 20:26 IST on 19 February 2025
Register to read our real-time news.Informist, Wednesday, Feb. 19, 2025
MUMBAI – The recent rally in gold prices has weighed heavily on the retail demand for gold jewellery in India, World Gold Council Research Head (India) Kavita Chacko said in a report released Wednesday. The surge in gold prices is because of a combination of geopolitical risks, growing concerns about inflation, and increased investment flows, she said.
Jewellery demand slumped in January and the weakness has continued into February despite the end of the inauspicious period in the Hindu calendar and the usual post-Budget pick-up in demand. "Rather than making fresh purchases, many buyers are opting to exchange old gold for new jewellery. Additionally, as gold prices surged past previous thresholds, many consumers are also taking the opportunity to sell old gold and lock in profits," Chacko said.
Domestic gold prices have risen around 14% in 2025 to a record INR 86,831 per 10 grams as of Friday, she said. Gold imports in January dropped as higher prices led to a pullback in demand. "... manufacturers did not pick up imports, reflecting the depressed demand environment," she said.
The gold import bill for January totalled $2.68 billion, down 43% on month. However, gold imports rose around 40% on year in January, Chacko said, citing data from the Ministry of Commerce. "We estimate that the volume of imports in January ranged between 30-35 tonnes," she said.
According to data released by the Association of Mutual Funds in India Wednesday, net flows into gold ETFs in January were at an all-time high of INR 37.51 billion, rising almost five times from INR 6.40 billion in December. "... the strong inflows in January can be attributed to investors redirecting free cash flow towards gold ETFs for diversification amid ongoing global and domestic economic and policy uncertainty," Chacko said. Sustained weakness in the domestic equity markets also drove flows into gold ETFs as investors favoured the safe-haven appeal of the yellow metal, she said.
The Reserve Bank of India resumed its gold purchases in January, after pausing in December following 11 consecutive months of buying. The central bank added 2.8 tonnes of gold in January, taking its total gold reserves to a new high of 879 tonnes. The share of gold in RBI's forex reserves has climbed to 11.3% in early February from 7.7% in January, she said. "This increase reflects the RBI's efforts to diversify its forex reserves, alongside a decline in its holding of foreign currency assets," Chacko said.
The government cut the customs tariff on gold jewellery to 20% from 25% in the Budget for 2025-26 (Apr-Mar). "This is likely done as part of the overall rationalisation of tariffs across commodities. However, since jewellery imports aren't that significant and are limited to high-end jewellery (and of low caratage), this cut in duty is unlikely to have much impact on domestic jewellery production," she said. End
US$1 = INR 86.95
Reported by Ashutosh Pati
Edited by Saji George Titus
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2025. All rights reserved.
To read more please subscribe
Share this Story:
