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Informist, Saturday, Apr. 19, 2025

MUMBAI – Seasonal and wedding related purchases in India are expected to support the demand for gold in April and May, World Gold Council Research Head (India) Kavita Chacko said in a report. Investor interest could strengthen as gold's appeal as a safe-haven asset and portfolio diversifier increases due to global economic uncertainties and financial market volatility, Chacko said.

Gold continued to rally this month and hit multiple record highs. A weaker dollar and heightened geopolitical risk, including tariff-led fear and uncertainty, have been key drivers of gold's performance, Chacko said. Strong gold exchange-traded fund buying across regions has propelled gold prices higher. "The trend of festival and wedding related purchases is likely to persist, supported by the safe-haven appeal of gold. But this may not offset the drop in discretionary purchases," Chacko added.

Despite record high prices, gold imports rebounded sharply in March, after two straight months of decline. Gold imports climbed to $4.4 billion in March, nearly doubling from the previous month, Chacko said, citing data from the Ministry of Commerce. "...the sharp uptick suggests a resurgence in demand and underscores a continued interest in gold, even at elevated prices. Based on our estimates, import volumes for the month were in the range of 47 tonnes to 52 tonnes," Chacko added.

Gold imports in 2024 have been revised upward to 812 tonnes from 724 tonnes, mainly due to revisions in import figures from July to October, Chacko said citing latest data from the Ministry of Commerce.

Meanwhile, there has been a noticeable shift in consumer behavior amid soaring prices as more buyers are opting to trade in old jewellery for new. Around 40-45% of purchases now involve some form of exchange, Chacko said citing anecdotal reports. "Amid broader financial market turmoil and uncertainty, gold's role as a store of value is becoming more pronounced, reflecting a shift in consumer behaviour from consumption-driven purchases to wealth preservation," Chacko said.

Leading jewellery retailers reported strong performance in the quarter ended March, with average revenue growth up 25-35% on year. This was largely fuelled by wedding related demand, buying during festivals, and a noticeable consumer shift toward gold, both as an adornment and a store of value, Chacko said. These retailers remain upbeat about the outlook for the June quarter because of early signs of strong consumer sentiment ahead of festivals such as Akshaya Tritiya. Leading retailers plan to open between 150 and 200 new showrooms over the next 12 months, setting the stage for continued gains in market share and deeper penetration across regions, Chacko added.

Indian gold ETFs recorded modest outflows in March, following 10 consecutive months of strong inflows. The pullback likely reflects profit-taking amid a record rally in gold prices, alongside portfolio rebalancing. Despite the outflows, the assets under management rose to a record high, driven by the surge in gold prices. Gold ETFs recorded net outflows of INR 800 million in March, Chacko said, citing data from the Association of Mutual Funds in India. The collective gold holdings of the 20 gold ETFs stood at 64.5 tonnes.

"The Reserve Bank of India added a modest 600 kilograms of gold to its reserves in March, resuming purchases after a pause in February, according to our estimates based on the central bank's weekly forex reserve data," Chacko said. The central bank's total gold holdings were at 879.6 tonnes, 11.7% of its total foreign exchange reserves, the highest level both in quantum and share, Chacko added.  End

US$1 = INR 85.37

Reported by Ashutosh Pati

Edited by Ashish Shirke

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