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Informist, Thursday, Jun. 19, 2025

 

NEW DELHI – Even though the Jun-Jul period typically marks the off-season for gold jewellery demand in India, a recovery is expected from mid-August with the onset of festivals and auspicious buying season, World Gold Council Research Head (India) Kavita Chacko said in a report. Investment demand for physical gold and gold-linked financial products is expected to remain resilient, supported by sustained investor interest, Chacko said.

 

After a pause in the rally in gold prices in May, prices have regained momentum in June and risen 5% on month driven by the flare-up in geopolitical tensions in West Asia and a rebound in demand for exchange-traded funds. "Domestic prices however, have continued to trade at a discount to international benchmarks (after adjusting for exchange rate and taxes), primarily due to subdued jewellery demand. The average discount has widened significantly – from $12/oz in mid-March to over $38/oz by Jun. 13," Chacko said.

 

Lower gold prices in May boosted footfalls in stores, particularly for large retailers offering promotional campaigns, but demand remained subdued and was largely centered around need-based purchases, Chacko said. In contrast, physical demand for gold bars and coins, which account for nearly 30% of consumer demand, has been firm. "There has been a steady and gradual uptick in demand for these products, underpinned by expectations of further increase in gold prices and relatively lower fabrication costs," Chacko added.

 

Chacko noted that demand has been concentrated in lower grammage coins, particularly those weighing less than 10 grams. Meanwhile, consumers are increasingly monetising their existing gold jewellery holding, either by exchanging them for new pieces, liquidating them, or using them as collateral for loans. The Reserve Bank of India's recent relaxation in norms for loans against gold jewellery is expected to further support this trend, Chacko said. Lending by commercial banks in this segment has surged nearly 120% on year to INR 2.23 trillion or $26 billion as of April-end, Chacko added.

 

Indian gold exchange-traded funds regained momentum in May, recording net inflows of INR 2.9 billion, after two consecutive months of outflows. The inflows were supported by sustained safe-haven demand amid ongoing geopolitical turmoil and market volatility. Preliminary data indicates that the trend of net inflows persisted through the first half of June, Chacko said. The cumulative assets under management of the 20 gold ETFs rose to INR 624 billion, up 97% on year. Total gold holdings rose by 200 kg in May to 64.65 tonnes, Chacko said citing data from the Association of Mutual Funds in India.

 

The RBI has paused the purchase of gold since March. It has added 3.4 tonnes of gold to its reserves this year, sharply lower than the 30.6 tonnes purchased during the same period last year. "This pause could likely be linked to the steep rise in gold prices since the beginning of the year, a trend we have observed among some other central banks too," Chacko said.

 

India's gold imports in May totalled $2.5 billion, down 13% on year and down 18% on month. Import volumes in May were in the range of 27-32 tonnes, down from 35 tonnes in April and significantly lower than 41 tonnes in May 2024.  End

 

US$1 = INR 86.82

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

 

Reported by Ashutosh Pati

Edited by Ashish Shirke

 

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