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Informist, Wednesday, Mar. 19, 2025

 

MUMBAI – The surge in gold prices, which have hit multiple record highs this year, has dented demand for gold jewellery in India, World Gold Council Research Head (India) Kavita Chacko said in a report released Wednesday. However, investment demand for bars and coins remains healthy, driven by bullish sentiment around the future trajectory of gold price.

 

Gold jewellery purchases have been resticted to those that are need-based, primarily weddings. This slowdown in demand is broad-based across both urban and rural areas. "In addition, financial year-end dynamics, such as statutory payments and tax-saving investments, are curtailing discretionary spending and further weighing on demand," Chacko said. Consumers are waiting on the sidelines, hoping for a correction in prices or signs of price stability, she added.

 

The rally in prices of the precious metal has prompted sales of old gold jewellery. "Retailers have reported a significant uptick in scrap or old gold sales, with some attributing up to a third of their sales to the exchange of old jewellery for newer, lighter pieces," Chacko said.

 

Gold prices have hit 13 new highs this year and have crossed the psychological threshold of $3,000 per ounce. Geopolitical and economic uncertainty, a weaker dollar, lowering of interest rates across economies, and inflation concerns have fuelled investment demand. "Gold remains India's top performing asset, with y-t-d (year-to-date) gains of 13%, in sharp contrast with the negative return from domestic equities and notably surpassing gains in fixed income assets (bonds and bank deposits)," Chacko said.

 

Gold imports fell 63% on year to $2.3 billion in February, marking the third consecutive month of decline and the lowest level since March 2024, Chacko said citing data from the Ministry of Commerce. This trend reflects the weak demand environment amid high prices.

 

Net inflows into gold ETFs in February were at INR 19.8 billion, the tenth consecutive month of positive flows, Chacko said, citing data from the Association of Mutual Funds in India. "Rising investor interest has encouraged fund houses to introduce new gold ETF products, two of which were launched in February, bringing the total number of domestic gold ETFs to 20," Chacko said.

 

The Reserve Bank of India held off buying gold in February, the second pause in three months. The bank has been increasing its gold holdings consistently since the start of 2024, purchasing an average of 6.3 tonnes in 12 of the last 14 months, she said. The share of gold reserves remained steady in February at 879 tonnes. The share of gold in the central bank's total forex reserves rose to 11.5%, the highest on record.  End

 

US$1 = INR 86.44

 

Reported by Ashutosh Pati

Edited by Akul Nishant Akhoury

 

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