India gold demand buoyed by import tax cut ahead of wedding season

Indian gold demand is poised for a robust period, driven by a reduction in import taxes and an upcoming festival and wedding season, which typically sees increased purchases in the world’s second-largest consumer of gold. Jewellery buying is expected to accelerate in the coming weeks as the country prepares for festivities, during which wearing and gifting gold is considered auspicious. According to the World Gold Council, gold imports more than tripled to 140 tons in August compared to the previous month, following the government's decision to lower the customs duty from 15% to 6%. This positive trend is anticipated to persist, buoyed by a bountiful monsoon that has improved crop prospects, enhancing the disposable incomes of farmers, a key consumer group. Key months for gold purchases will be Diwali in November, followed by December and January, which are busy wedding months.

“The pro-gold policy measures are positively impacting the domestic gold market,” stated the regional CEO for India at the World Gold Council, Mr. Sachin Jain. He noted that these changes could add over 50 tons to gold demand in the second half of 2024 compared to last year, with total requirements estimated between 750 tons and 850 tons. This momentum follows a modest 4.8% YoY increase in inbound shipments, totalling 305 tons in the first half of 2024. The surge in purchases reinforces India’s position as a global bright spot for physical gold consumption, particularly as jewellery demand has waned in China due to an economic downturn. With local gold prices decreasing, many price-sensitive consumers now opt for heavier jewellery, reversing a long-term trend favouring lighter pieces. Additionally, interest in physical gold is mirrored in the exchange-traded fund (ETF) space, with net additions to Indian gold-backed ETFs seeing positive inflows for 4 consecutive months. Director at Commtrendz Risk Management Services, Mr. Gnanasekar Thiagarajan, emphasized that gold-backed ETFs have emerged as a portfolio diversifier for investors traditionally focused on equities.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.