India’s Q3 2021 gold demand jumped 47 percent at 139.1 tonnes reflecting a combination of low base effect and return of positive trade and consumer sentiments, said WGC Regional CEO, India, Somasundaram PR. This is primarily driven by what appears to be a firm grip on the pandemic with higher vaccination rates and falling infection rates, leading to a strong rebound in economic activity, he said.
Investment in gold bars up 18%
While gold jewellery demand increased by 58 percent to 96.2 tonnes, investment demand for bars and coins also grew by 18 percent, in a quarter that tends to be seasonally subdued due to monsoons and inauspicious periods like Pitru-Paksha when buyers stay away, he said. Softer gold prices has also generated significant consumer interest ahead of seasonal demand.
Q4 festive season to boost demand
Trade activity witnessed during various buyer-seller meets and anecdotal feedback from 75 manufacturers indicate that this Q4 festive season could be on the best in several years, with strong imports (255.6 tonnes an 187 percent increase over last year) much ahead of Q3 demand, Somasundaram said.
A 50 percent drop in gold recycling at 20.7 tonnes also underlines strong consumer intent to hold gold rather than sell it, aided by a robust institutional market for loan against gold that continues to grow.
Retail demand bounces to pre-COVID levels
Looking ahead with restrictions being gradually lifted across the country, retail demand is bouncing back to pre-COVID levels. With the upcoming festive and wedding season, there is all enthusiasm towards gold demand, and we anticipate it to be the busiest gold-buying season, since the start of COVID, WGC Regional CEO said.
Soaring demand for digital gold
Demand for digital gold has also increased manifold, innovative tech initiatives, tie-ups with digital gold and UPI platforms by leading jewellers has brought about a substantial increase in volume of buyers and investors preferring online purchases.
In the months ahead, soaring commodity prices and logistical costs are expected to impose further pressures and the RBI has already adjusted its inflation expectations higher.
Rising inflation tends to drive demand for gold
Somasundaram said, rising inflation tends to drive gold demand. Gold is perceived as a strong hedge against inflation and decades of data supports this assumption. While we have not made any forecast for the rest of the year, barring any unexpected twist in tale, we could see a sharp spike in demand in Q4 2021, he added.