Demand for gold in India, the second-biggest consumer of the yellow metal, is expected to be strong in the next few months thanks to the twin effect of a cut in its import duty and the upcoming wedding season pushing up demand for gold jewellery.
Imports more than tripled to 140 tons in August from the previous month, according to the World Gold Council, as the government lowered the customs levy to 6 per cent from 15 per cent.
The positive trend is likely to continue as a bountiful monsoon this year has brightened crop prospects, potentially boosting the disposable incomes of farmers — a major consuming group, Bloomberg reported.
Jewellery buying will gather pace in a couple of weeks as the world’s most populous nation enters the festival and wedding season — when wearing and gifting gold is considered auspicious.
Hindu festivities will culminate with Diwali in November, while December and January would be busy months for marriages.
“The pro-gold policy measures are positively impacting the domestic gold market,” said Sachin Jain, regional CEO for India at the World Gold Council.
India’s gold demand set to rise
The changes could help add 50 tons or more to gold demand in the second half of 2024 versus last year, he said, adding that overall requirements could be between 750 tons and 850 tons this year.
The momentum comes after inbound shipments rose just 4.8 per cent from a year ago to 305 tons in the first half of this year, according to the commerce ministry.
The purchases reinforce the South Asian nation’s position as a global bright spot for physical consumption, at a time when jewellery purchases have tanked in the biggest buyer China.
Consumers there have grappled with an economic downturn during what should be one of the busiest times of the year.
With India witnessing lower local costs, many price-sensitive buyers are now opting for heavier jewellery pieces, bucking a long-term preference for cheaper lightweight items, said Chirag Sheth, principal consultant for South India at Metals Focus.
“Suddenly you’ve seen gold cheaper by 9 per cent — and all those people who were waiting on the sidelines for the prices to drop have all rushed to the market.”
It’s not just physical gold that’s drawn attention.
Net additions to Indian gold-backed exchange-traded funds have been positive for four straight months, with inflows hitting a record in August, according to the WGC.
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