Gold demand rises 47% in July-September: WGC

‘Festivals, inflation fears to add sparkle’

VIJAYAWADA, ANDHRA PRADESH, 13-11-2020: People buying gold jewellery on the occasion of Dhanteras and Diwali festival, at a jewellery shop on November 13, 2020. Photo: V Raju / The Hindu

Demand for gold in India, which was 47% higher in the July-September quarter compared with a year earlier, is expected to rise further in the current quarter due to festival and wedding season demand, said Somasundaram P.R., regional CEO, India, World Gold Council. Expectations of higher inflation in the country would also likely further spur demand for the yellow metal, he added.

”India’s Q3 2021 gold demand at 139.1 tonnes is a 47% jump over 2020, reflecting a combination of low base effect and return of positive trade and consumer sentiments,” he 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 58% to 96.2 tonnes, demand for bars and coins as investments grew 18% year-on-year as per data released by the Council.

Softer gold prices had also generated significant consumer interest, he said.

As per the WGC report, there was a 50% drop in gold recycling to 20.7 tonnes, which indicated strong consumer intent to hold gold rather than sell it.

The upcoming festival and wedding season could be the busiest gold-buying season since the start of the pandemic, he pointed out.

Demand for digital gold has also risen manifold with a large number of buyers and investors preferring online purchases.

“In the months ahead, soaring commodity prices and logistics 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,” he said.

“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 the 4th quarter of 2021,” he said.

India’s Q3 2021 gold demand value grew 37% to ₹59,330 crore compared with a year earlier.

The value of jewellery demand rose 48% to ₹41,030 crore.

In value terms, gold Investment demand in Q3 climbed 19% to ₹18,300 crore.

Total net bullion imports expanded 187% to 255.6 tonnes, the WGC said.