India Sees High Demand For Gold, But Its Allure Could Wane This Quarter

The demand for gold in India exceeded expectations in the three months through September, though it may see a drop in this quarter, according to the World Gold Council.

Overall demand for gold in India stood at 191.7 tonnes in the third quarter of the calendar year, up 14% year-on-year, it said in a release on Tuesday. In value terms, this amounted to Rs 85,010 crore, up 19% from the same quarter a year ago.

The spike was led by a recovery in jewellery demand in urban areas, particularly in South India.

Of the total, demand for jewellery stood at 146.2 tonnes, up 17% year-on-year. Investment demand during the quarter only grew 6% to 45.4 tonnes, as inflows into exchange-traded funds dried up. The decline in the price of gold has made such investments less attractive. In fact, globally, gold-backed exchange-traded funds saw an outflow of 227.3 tonnes during the quarter.

The price of gold has fallen sharply year-to-date on the back of the rise in the value of the U.S. dollar. As of Nov. 1, gold prices dropped by 14.4% year-to-date to $1,648.0034/troy ounce.

On the other hand, for the first time since the onset of the pandemic, gold bar and coin demand was higher due to full-fledged celebrations of festivals like Ganesh Chaturthi. Here, the fall in gold prices aided demand.

Although demand in certain urban pockets picked up in the July-September quarter, rural demand was impacted by the monsoons and by higher inflation, Somasundaram PR, chief executive officer of the World Gold Council, India, said in the press release.

The World Gold Council expects the demand for gold to drop year-on-year in the last quarter of the year. The overall demand has been pegged at 250–300 tonnes, compared with 343.9 tonnes a year ago.