India’s coin investments, gold bars have been highest since 2015, touched 55 tonnes

According to data from the World Gold Council's (WGC) report, India’s coin and bar investment reached 55 tonnes in the third quarter of the current calendar year, showing the highest for a third quarter since 2015. However, gold could lose its glitter during the peak festive season as rising prices could significantly impact demand. The report further stated that the rising gold prices could eventually lead to the lowest purchase volume in three years.

In India, the demand for gold usually strengthens towards the end of the year, along with the traditional wedding season and major festivities such as Diwali and Dusherra, as buying gold during this time is considered auspicious.

For gold bars and coins, demand jumped 20% year-on-year (y-o-y) and was 38% higher than its five-year quarterly average of 40 tonnes. In response to the gold price's decline from its record high in the second quarter, investors increased their holdings in anticipation of a price recovery in the fourth quarter, coinciding with the start of the wedding and celebration season.

India, the second-largest gold consumer in the world, saw a 10% increase in gold demand to 210.2 tonnes in the third quarter of this year, driven by both seasonal demand and a decline in gold prices.  According to the regional Chief Executive Officer (CEO) of WGC India, Mr. Somasundaram PR, during the last quarter, gold prices softened a bit, but now they have started inching up. During the Dhanteras festival and wedding season in the next two months, prices will play a critical role.

The two main drivers of growth during the third quarter were the South Indian festive season and the local gold price's decline from record highs. In part, due to Adhik Maas, which is considered unfavourable for making new purchases, the quarter started off quite slowly. However, August and September saw a spike in business because of holidays like Varalakshmi and Onam.

Purchases due to festivities helped South India outperform other regions. North India was the weakest and saw a yearly decline, partly showing a weaker rural sector and a relative lack of major festivals during the quarter.

The report also mentioned that the lower-carat jewellery has gained popularity in the face of an elevated gold price and has benefited from retailers promoting these higher margin products.

Mr. Somasundaram PR stated that as the prices softened a bit in the last quarter, there were more people waiting to buy gold and buying more bars and coins instead of jewellery. Therefore, there was a 20% jump in demand for bars and coins in the third quarter. With the first nine month’s demand at 481.2 tonnes, the full-year 2023 gold demand would be in the range of 700-750 tonnes, marginally lower than the 774 tonnes demand in 2022.

The sale of old jewellery and coins by certain people as a result of rising gold prices has increased scrap supply by 37% to 91.6 tonnes in the first nine months of the year. If prices stay where they are, this pattern should carry over into the December quarter.

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