Gold prices are experiencing a robust rebound in both international and domestic markets, driven by increased jewellery purchases and investment activity, as highlighted in the latest report from the World Gold Council. There are encouraging signs of recovery in rural demand, bolstered by a better monsoon and increased crop sowing this year, which are expected to enhance economic conditions in rural areas and stimulate gold buying, especially during the festive season.
The report notes that gold prices strengthened in September, with international prices rising by 2.8% and domestic prices increasing by 1.6%. Despite these gains, Indian gold prices remain 2% lower than pre-Union Budget levels due to a 9% reduction in import duties announced in July. In August, gold performed well, with international prices climbing by 3.7% and domestic prices by 3.9%, largely influenced by expectations of easing interest rates in the U.S., which led to a decline in the U.S. dollar and enhanced gold’s attractiveness as an investment.
Gold demand in India remains strong, particularly following a surge after the import duty cut. Although demand for jewellery and bars and coins has stabilized since then, buying activity remains higher than before the duty reduction. Many consumers are now making purchases that were previously delayed, with a noticeable interest in heavier jewellery pieces. Industry participants are eagerly anticipating the festive and wedding seasons, which run from late August through December, as festive buying has already shown strong momentum.
Indian gold exchange-traded funds (ETFs) have seen a notable uptick in investor interest following the import duty cut and changes to long-term capital gains tax for gold ETFs announced in the Union Budget. August recorded an impressive Rs 21 billion (~USD 238 million) in inflows, significantly surpassing the average monthly inflows of Rs 8 billion during the first half of 2024. Net inflows for the month also hit a record Rs 16 billion (~USD 192 million). By the end of August, total assets under management (AUM) for Indian gold ETFs reached Rs 374 billion (~USD 4.4 billion), reflecting an 8% month-on-month and a 54% year-on-year increase.
So far in 2024, net inflows into Indian gold ETFs have amounted to Rs 61 billion (~USD 735 million), a sharp rise from Rs 15 billion during the same period last year. These ETFs collectively added 9.5 tons of gold this year, increasing total gold holdings to 51.8 tons, marking a 29% year-on-year rise. This steady influx mirrors global trends, fueled by strong gold price performance, safe-haven demand, and lower opportunity costs.
The Reserve Bank of India (RBI) has also been actively acquiring gold, purchasing 10.3 tons in the six weeks leading up to September 6, bringing its total purchases for the first eight months of the year to 50 tons. This surpasses the net gold purchases made in both 2022 and 2023, establishing the RBI as one of the world’s leading gold buyers this year. Consequently, the RBI’s gold reserves have reached a record high of 853.6 tons, accounting for 9% of its total foreign reserves, up from 7.5% a year ago.
India saw a record spike in gold imports in August, totaling USD 10.1 billion, a threefold increase compared to the previous month and double the value from a year ago. This surge is attributed to reduced import duties and heightened seasonal demand in anticipation of the festive season. In volume terms, gold imports reached approximately 140 tons in August, reflecting a threefold rise from the previous month. From January to August, gold imports have increased by 30% year-on-year, totaling USD 32 billion, underscoring the growing appetite for gold in India.
