Gold demand sees uptick ahead of festive season

According to Somasundaram PR, Regional CEO, India, World Gold Council, the surge in gold demand reflects a combination of low base effect and return of positive trade and consumer sentiments.

Hyderabad: India has witnessed an uptick in gold demand in the third quarter (July-September) of 2021, ahead of the festive season. Demand for gold was at 139.1 tonnes, up by 47 per cent as compared to overall Q3 demand for 2020 (94.6 tonnes) while in terms of value, it was Rs 59,330 crores, up by 37 per cent as compared to Q3 2020 (Rs 43,160 crores).

According to Somasundaram PR, Regional CEO, India, World Gold Council, the surge in gold demand reflects a combination of low base effect and return of positive trade and consumer sentiments. 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.

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Softer gold prices have also generated significant consumer interest ahead of seasonal demand. Trade activity witnessed during various buyer-seller meets and feedback from manufacturers indicate that this Q4 festive season could be the best in several years, with strong imports much ahead of Q3 demand.

Total Jewellery demand in India for Q3 2021 increased by 58 per cent at 96.2 tonnes as compared to Q3 2020 (60.8 tonnes) and the value of jewellery demand was Rs 41,030 crores, up by 48 per cent from Q3 2020 (Rs. 27,750 crores).

Gold recycling

Total gold recycled in India in Q3 2021 was 20.7 tonnes, down by 50 per cent compared to 41.5 tonnes in Q3 2020 while the total bullion imports in Q3 2021 was 255.6 tonnes, registering an increase of 187 per cent compared to 89 tonnes in Q3 2020.

A 50 per cent 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.

Recovery in demand

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 more enthusiasm towards gold demand, and the World Gold Council anticipates it to be the busiest gold-buying season since the start of Covid.

Digital push

Demand for digital gold has also increased with the help of innovative tech initiatives and tie ups with UPI platforms by jewellers, bringing 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.

Impact of inflation

Gold is perceived as a strong hedge against inflation and decades of data supports this assumption. The World Gold Council expects a sharp spike in demand in Q4 2021.

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