Gold demand in India showed no signs of slowing down in the July-September period this year. A World Gold Council report showed demand rose 18 percent year-on-year to 248.3 tonnes in the September quarter due to a rise in jewelery consumption and gold investment.

The world body’s Gold Demand Trends report shows that in value terms, India’s gold demand during the quarter rose 52 per cent year-on-year to Rs 1.65 lakh crore as compared to Rs 1.08 lakh crore in the same period last year.

“A sharp cut in gold import duties in July led to a revival in jewelery demand, which recorded its third strongest quarter since 2015,” said Sachin Jain, chief executive of India’s World Gold Council.

Sales of gold jewelry increase

Indian demand for gold jewelery rose 10 per cent year-on-year to 171.6 tonnes in the September quarter. This included the demand for weddings. “The tariff cut negated much of the rise in gold prices during August, encouraging some advance buying for weddings scheduled for the coming quarters, as well as reducing pent-up demand from previous quarters,” Jain said, adding: ” Good monsoons also acted as a tailwind for robust growth in lower-tier cities and rural areas.”

During July-September, bullion investment demand rose 41 percent year-on-year to 76.7 tonnes, the highest level for the September quarter since 2012. Investor optimism and bullish price expectations accelerated with The price correction driven by the rights cut in July, which allowed many investors to enter the market.

“Indian gold demand remains strong in the fourth quarter due to Dhanteras and wedding demand, although with the continued rise in the price of gold offsetting the impact of the tax cut, we may see further investor sentiment to wait for price corrections as opportunities to add to their holdings,” the report says.

RBI shores up its gold holdings

Gold reserves at the Reserve Bank of India increased by 13 tonnes during the September quarter. The RBI has added gold to its reserves each month of the quarter, adding 13 tonnes in July-September, slightly less than the 18 tonnes purchased in both January-March and April-June, the report said. Its gold reserves rose to 854 tonnes as of Sept. 30, up 6 percent from the end of 2023, the WGC said. Meanwhile, purchases by global central banks slowed in the third quarter, down 49 percent year-on-year, although demand remained strong at 186.2 tonnes due to a sharp rise in prices, causing a pause. in purchases by some central banks and limited tactical sales by others. .

Gold smuggling slows down

Duty cuts on gold have also reduced smuggling, with India’s net bullion imports soaring 111.5 percent quarter-on-quarter to 360.2 tonnes in July-September.

“Smuggled gold flows into India have virtually disappeared thanks to the reduction in tariffs,” Jain said. “India is on track to have a very strong year, as year-to-date investment is already approaching the annual totals of the last four years. We expect full-year gold demand to be in the range 700-750 tons,” he said.

Global demand falls due to high prices

Meanwhile, global gold demand rose 5 percent year-on-year to a record 1,313 tonnes in the September quarter. In value terms, demand increased 35 percent year-on-year to exceed $100 billion for the first time in history.

The main driver of global growth was gold exchange-traded funds, which recorded inflows of 95 tonnes, the report said. July-September was the first quarter of inflows to these funds since the first quarter of 2022. In July-September 2023, there were outflows of 139 tons, according to the report.

“The ‘fear of missing out’ among investors has been a key driver of increased demand this quarter. Investors have shown an appetite to ride price momentum, are encouraged by the prospect of future interest rate cuts and are also considering gold’s role as a safe haven amid US political uncertainty and escalating conflicts. in the Middle East (Western Asia). ),” the report says.

However, investment demand for gold jewelry and bullion and coins fell annually. Gold jewelry consumption was 459 tons, down 12 percent from the previous year, despite strong growth in India. Although consumers bought less gold, their spending on gold jewelry increased and therefore the value of demand for gold jewelry increased 13 percent year-on-year to more than $36 billion, according to the council.

Gold prices averaged an all-time high of $2,474.3 an ounce in the September quarter, up 28 percent year-on-year and up 6 percent from the previous quarter. “In the third quarter, increased investment and over-the-counter activity underpinned global gold demand and boosted price performance. While the rising gold price reduced demand in most consumer markets, the cut in import duties in India notably kept demand for jewelry, bars and coins high in a record price environment,” Street said.

China, the largest importer of gold, experienced its weakest third quarter since 2010, with demand for gold jewelry 36 percent below the 10-year average. The country’s total gold jewelry consumption fell 33 percent year-on-year to 103 tons, according to the report. However, the largest importer recorded a quarterly increase of 19 per cent from 86.2 tonnes in the June quarter. This increase was attributed to demand during Chinese Valentine’s Day, the mid-autumn festival and the National Day holiday.