India's gold bar, coin investments touch 55 tonnes, highest since 2015

Demand jumped 20% y/y and was 38% higher than its five-year quarterly average of 40t.

Bar and coin investment in India reached 55 tonne in the third quarter of the current calendar year, the highest for a third quarter since 2015, revealed data from the World Gold Council report.  However, gold could lose its glitter during the peak festive season as rising prices could significantly impact demand.

According to the World Gold Council, rising gold prices could lead to the lowest purchase volume in three years.

Gold demand in India typically strengthens towards the end of the year, coinciding with the traditional wedding season and major festivals such as Diwali and Dusherra, when buying gold is considered auspicious.
 

For gold bars and coins, demand jumped 20 per cent year-on-year and was 38 per cent higher than its five-year quarterly average of 40 tonne.

"Investors reacted to the downward correction in the gold price from its Q2 record high, adding to their holdings in the expectation of a price recovery in Q4 as the wedding and festive season gets underway," noted the report. 

The global gold demand between July-September 2023 was 8 per cent ahead of its five-year average, but 6 per cent weaker year-on-year (YoY) at 1,147t, according to data by the World Gold Council. 
 

Gold demand in India, the world's second-largest consumer of the yellow metal, rose 10 per cent to 210.2 tonnes during the third quarter of this calendar year, aided by softening of gold prices and festive demand.  However,  the market remains weaker year to date compared with the same period last year (363t vs 381t in 2022), as record local gold prices deterred consumers.

WGC India Regional CEO Somasundaram PR said gold prices softened a bit during the last quarter but now they have started inching up. Prices will play a critical role during the Dhanteras festival and wedding season in the next two months.

During the third quarter,  the correction in the local gold price from record highs, combined with the festive season in south India,  were the two major drivers of growth. After a fairly soft start to the quarter – in part due to Adhik Maas, which is viewed as inauspicious for making new purchases –  August and September witnessed a pick-up in activity thanks to festivals such as Onam and Varalakshmi. 
 

Festive purchases helped South India outperform other regions. By contrast, north India was the weakest and saw a yearly decline, partly reflecting a weaker rural sector and a relative lack of major festivals during the quarter.
 

Lower-carat (18K and 14K) jewellery has gained popularity in the face of an elevated gold price and has benefited from retailers promoting these higher-margin products, noted the report.

Indian jewellery demand strengthened in Q3 despite the elevated local gold price

"In the last quarter, as prices softened a bit, more people were waiting to buy gold and bought more bars and coins instead of jewellery. Therefore there was a 20 per cent jump in demand for bars and coins in Q3," Somasundaram said.

With the first nine months' 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, he said.

Higher gold prices have led some individuals to sell their old jewellery and coins, resulting in a 37 per cent increase in scrap supplies to 91.6 tons in the first nine months of the year. This trend is expected to continue into the December quarter if prices remain at their current level.

The fourth quarter is usually the peak period of demand with festivities like Navratri, Dusshera, Dhanteras and Diwali. Moreover, marriage season demand is expected to support prices in this quarter, said jewellers.

"Gold prices have jumped about 9% since Hamas attacked Israel on October 7, bouncing back from a seven-month low as demand for safe-haven assets increased. Gold prices are expected to stay elevated in November due to safe-haven demand amid geopolitical concerns in the Middle East, festive demand and wedding purchases in India," said Sachin Kothari, Director at Augmont Gold 

"India, being the second largest gold consuming nation in the world, consumption in the second half of every year is typically higher than in the first half, coinciding with Diwali in October (beginning of Q4 of Calender Year).

Currently, gold prices are on the rise due to the uncertainty in the international market caused by the ongoing Israel-Hamas conflict. However, with the festive buying going on in full swing, the demand for yellow metal in the domestic market will remain unimpacted and continue to strengthen owing to the upcoming wedding season," said Colin Shah, MD, Kama Jewelry.