Gold loses shine in India during Q1, demand falls 5%

Gold prices surged 18% YoY to $2,338.2 per ounce in Q1

MUMBAI: Gold appears to be losing its allure in India due to rising prices, according to a recent report by the World Gold Council (WGC).

The report indicates that gold demand in India for the April–June 2024 quarter was 149.7 tonnes, marking a 5 per cent decline from 158.1 tonnes in the same period last year.

In value terms, however, gold demand in India reached Rs 93,850 crore for the April–June 2024 period, up 14 per cent from Rs 82,530 crore in the previous year.

Sachin Jain, Regional CEO for India at the World Gold Council, noted, “India’s gold demand softened slightly in Q2-CY24. This can be attributed to record-high gold prices affecting affordability and leading to a slowdown in consumer purchases. Nevertheless, the overall value of demand remained strong, increasing by 14 per cent, which highlights gold’s enduring value for Indian consumers.”

During the June 2024 quarter, gold prices surged 18 per cent year-on-year (YoY) to $2,338.2 per ounce, reaching a record high of $2,427 per ounce. Prices were also up nearly 13 per cent compared to the December 2023 quarter.

High prices hit jewellery demand

Jewellery demand in India faced challenges due to high prices, declining by 17 per cent to 107 tonnes. Contributing factors included elevated local prices, the general election, and a severe heatwave, making it the weakest second quarter since the COVID-affected Q2-CY21.

Despite temporary boosts from festivals like Akshaya Tritiya and Gudi Padwa, high prices continued to dampen consumer sentiment. On the other hand, investment demand surged by 46 per cent to 43.1 tonnes, the highest second-quarter level since 2014, driven by expectations of further price appreciation and safe-haven buying.

Duty cuts may boost demand

Looking ahead, the recent 9 per cent reduction in the import duty on gold in Budget 2024 is expected to boost gold demand in the July quarter, ahead of the main festive season starting in September. This increase could be further supported by a favorable monsoon.

The WGC also highlighted that India’s economic outlook remains positive, with strong GDP forecasts and a recovering rural sector likely to support demand in the second half of the year. The forecast for full-year demand is between 700 and 750 tonnes.

Globally, jewelry demand dropped 19 per cent YoY to a four-year low of 391 tonnes in the June 2024 quarter. However, central banks increased their gold purchases, with net buying up 6 per cent YoY to 184 tonnes, driven by the need for portfolio protection and diversification.