According to the World Gold Council, gold prices in India have surged 10% year-to-date, mirroring the global trend of an 18% increase.
This rise is attributed to strong central bank purchases, geopolitical risks, and anticipated US Federal Reserve policy changes.
A report in The Economic Times stated that the recent reduction in import duties has reignited gold demand across India.
The India International Jewellery Show reported a substantial increase in retailer order bookings, particularly for the upcoming festive and wedding seasons.
The report added that manufacturers noted order levels not seen in years, indicating robust interest from retailers and consumers.
Bar and coin buying has remained strong, with consumers and jewelers taking advantage of more attractive prices to stock up.
According to the report, Indian consumer demand could increase by 50 tonnes or more in the second half of 2024.
Domestic gold has traded at a discount to international prices for five months, but following the Union Budget announcement, it has now shifted to a premium.
While premiums have moderated recently, this change highlights the market’s evolving sentiment.
Gold ETFs have become more attractive due to budget changes, including a reduced long-term investment holding period and lower tax rates.
July saw net inflows of Rs 13.4 billion into gold ETFs, the highest since February 2020 and an 84% increase from June.
The report stated that The Reserve Bank of India has continued its gold purchasing trend, with year-to-date acquisitions totaling 44.3 tonnes.
This surpasses the combined purchases of the past two years, bringing the RBI’s gold reserves to a record 849 tonnes, representing 8.8% of total foreign reserves.
The report added that gold imports remained steady, averaging USD 3.2 billion between April and July. However, the July 2024 gold import bill was 11% lower than the previous year, with an estimated 26% decrease in volume.
The 9% reduction in import duty announced in the Union Budget 2024-25 has led to a 6% decrease in the landed cost of gold, significantly impacting domestic market dynamics despite the surge in international gold prices.
