India's Gold Appetite Soars 8% in Q1, Reaching 136.6 Tons

India's gold demand exhibited an 8% rise to 136.6 tonnes in the first quarter (January-March) of 2024, despite high gold prices. This increase was driven by a robust economic environment, aggressive gold purchases by the Reserve Bank of India (RBI), and a 4% growth in jewelry demand. The investment demand for gold also witnessed a 19% surge, indicating a strong preference for gold as a safe haven during periods of economic uncertainty.

India's Gold Demand Surges by 8% in January-March Quarter, Reaching 136.6 Tonnes

New Delhi, India: India's insatiable appetite for gold has remained robust, with demand surging by 8% annually to 136.6 tonnes in the March quarter. This increase is attributed to a favorable economic environment and aggressive gold purchases by the Reserve Bank of India (RBI).

The World Gold Council (WGC), in its global report 'Gold Demand Trends Q1 2024,' revealed that India's total gold demand, encompassing both jewelry and investment, climbed from 126.3 tonnes in the corresponding period last year to 136.6 tonnes.

The demand was bolstered by a 4% growth in jewelry consumption, rising from 91.9 tonnes to 95.5 tonnes. Investment demand, encompassing bars, coins, and other forms, also witnessed a significant increase of 19%, expanding from 34.4 tonnes to 41.1 tonnes.

Sachin Jain, Regional CEO for India at WGC, attributed the surge in demand to Indians' enduring affinity for gold. He noted that the nation's robust macroeconomic environment fostered jewelry consumption despite historically high prices leading to a temporary slowdown in sales towards the end of the quarter.

Jain expressed optimism that India's gold demand would likely fall within the 700-800 tonne range for the year. However, he acknowledged that if the price rally persists, demand could gravitate towards the lower end of this spectrum. In 2023, India's gold demand reached 747.5 tonnes.

Central Bank Purchases and Market Dynamics Boost Demand

Jain identified several factors driving demand growth in January-March. He highlighted that historically, eastern markets like India and China react to price fluctuations, while western markets respond to price increases.

"For the first time, we witnessed a complete reversal where Indian and Chinese markets reacted to an increase in gold prices," Jain observed. He further noted that demand had escalated for both jewelry and investment products like bars, coins, and exchange-traded funds (ETFs).

The RBI's aggressive gold buying has also contributed to the demand surge. The central bank has indicated its intention to continue these purchases.

Outlook for April-June Quarter and Beyond

Jain cautioned that gold demand may decelerate in the April-June quarter due to a sharp rally in prices and the ongoing election process. Nevertheless, he expressed belief that strong cultural and seasonal factors, such as festivals and weddings, coupled with expectations of a favorable monsoon and solid economic growth, will continue to support demand.

The WGC reported that India's gold demand in value terms surged by 20% to Rs 75,470 crore, compared to Rs 63,090 crore in Q1 2023. Jewelry demand accounted for Rs 52,750 crore, a 15% increase from Rs 45,890 crore, while investment demand rose by 32% to Rs 22,720 crore from Rs 17,200 crore.

Total gold recycled in India during the quarter reached 38.3 tonnes, representing a 10% increase from 34.8 tonnes in Q1 2023. Imports also increased by 25% to 179.4 tonnes, compared to 143.4 tonnes in the same period last year.

The average quarterly price in Q1 2024 was Rs 55,247.20 per 10 grams of gold, up from Rs 49,943.80 per 10 grams in Q1 2023 (excluding import duty and GST).

Jain emphasized that the gold bar and coin segment witnessed a notable 19% year-on-year increase to 41 tonnes, equaling the robust demand seen in Q1 2022, which was the strongest first quarter since 2014. He attributed this trend to a price correction in February that sparked investor interest and anticipation of a rebound.

Investments into gold ETFs also saw positive inflows of over 2 tonnes.

Despite the current elevated gold prices, Jain expressed confidence that demand will remain supported by strong cultural and seasonal factors, a favorable economic outlook, and expectations of a robust monsoon.