India's Gold Demand can 'Shine' in Q4

Mumbai: India’s gold demand during Q3 2021 (July-September) jumped 47% to 139.1 tonnes versus 2020 owing to the return of positive consumer sentiments and increased trading activity, the World Gold Council (WGC) said in its latest Gold Demand Trends report. India’s Q3 2021 gold demand value was Rs. 59,330 crore, an increase of 37% as compared to Q3 2020.

Jewellery demand in India in Q3 increased approximately 60% both q-o-q and y-o-y, due to strong pent-up demand, a rebound in economic activity and lower gold prices. Total Investment demand for Q3 2021 at 42.9 tonnes increased by 27% in comparison to Q3 2020. In value terms, gold investment demand in Q3 2021 was Rs.18,300 crore, up by 19% from Q3 2020.

Mr. Somasundaram PR, Regional CEO, India, World Gold Council said, “This is primarily driven by what appears to be a firm grip on the pandemic with higher vaccination rates and falling infection rates, leading to a strong rebound in economic activity. While gold jewellery demand increased by 58% to 96.2 tonnes, investment demand for bars and coins also grew by 18%, in a quarter that tends to be seasonally subdued due to monsoons and inauspicious periods like Pitru-Paksha when buyers stay away.

“Softer gold prices also generated significant consumer interest ahead of seasonal demand. Trade activity witnessed during various buyer-seller meets and anecdotal feedback from 75 manufacturers indicate that this Q4 festive season could be on the best in several years, with strong imports (255.6 tonnes an 187% increase over last year) much ahead of Q3 demand. A 50% drop in gold recycling at 20.7 tonnes also underlines strong consumer intent to hold gold rather than sell it, aided by a robust institutional market for loan against gold that continues to grow.

“Looking ahead with restrictions being gradually lifted across the country, retail demand is bouncing back to pre-covid levels. With the upcoming festive and wedding season, there is all the more enthusiasm towards gold demand, and we anticipate it to be the busiest gold-buying season, since the start of covid. Demand for digital gold has also increased manifold, innovative tech initiatives, tie-ups with digital gold and UPI platforms by leading jewellers has brought about a substantial increase in volume of buyers and investors preferring online purchases. In the months ahead, soaring commodity prices and logistical costs are expected to impose further pressures and the RBI has already adjusted its inflation expectations higher. Rising inflation tends to drive gold demand. Gold is perceived as a strong hedge against inflation and decades of data supports this assumption. While we have not made any forecast for the rest of the year, barring any unexpected twist in tale, we could see a sharp spike in demand in Q4 2021.”