Investment demand for gold in India showed steady growth since Diwali even as jewellery consumption slowed, the World Gold Council (WGC) said.

“Since the peak Diwali buying season, jewellery demand has been lacklustre; gold prices fluctuations have kept consumers on the sidelines despite the onset of the wedding season,” Kavita Chacko, research head India, WGC, said in a report.

But physical investment demand has shown steady growth, with anecdotal reports indicating strong sales of gold bars and coins.
The positive sentiment around gold and its appeal as a safe-haven asset supported the trend of higher investments.

Chacko said the trend of growth in investment demand for the yellow metal is likely to continue.

In the near-term, gold investment demand could face headwinds from the inauspicious period for purchasing gold as per the Hindu calendar, which runs from mid-December to mid-January.

“Nonetheless, there are expectations of some demand from holiday purchases, particularly from non-resident Indians visiting the country during this period,” Chacko added.

Gold ETF demand resilient
In November, inflows into the gold exchange-traded funds remained strong and surpassed the average monthly inflow for this year.

Though inflows last month were lower than the record levels seen in October.

The continued positive sentiment towards gold, coupled with volatility in domestic equity markets, likely fuelled these inflows, even as major global markets experienced outflows, according to the WGC.

According to the Association of Mutual Funds in India (AMFI), gold ETFS witnessed net inflows of $149 million in November. This was above this year’s monthly average of $115 million.

“The strong inflows into gold ETFs this year underscore heightened investor interest, with inflows recorded in every month except April,” Chacko said.

Over the first 11 months of 2024, net inflows into gold ETFs amounted to $1.265 billion, a 3.7-fold increase from last year, WGC said.

During this period, 14.5t of gold was added to the cumulative holdings of these funds.

Three new gold ETFs were launched in India this year, bringing the total number of physically backed funds available in the local market to 18.

RBI continues to purchase gold
The Reserve Bank of India added to its gold reserves in November, bringing its total holdings to 876 tons, a 9% increase from the previous year, according to WGC estimates.

Last month, the central bank of India purchased 8.4 tons of gold, according to estimates from RBI and WGC.

This marks the 11th consecutive month of gold purchases, with an average monthly acquisition of 6.6 tons.

RBI has been one of the largest gold buyers among central banks this year.

So far in 2024, the RBI has added 72.6 tons of gold to its reserves, significantly higher than just 16 tons purchased last year and 33 tons in 2022.

Gold now represents 10.2% of the RBI’s forex reserves, up from 7.8% a year ago.

Gold imports at record high
Imports of gold rose to a record high in November, according to initial reports, said WGC.

According to data from the Ministry of Commerce, imports in November amounted to $14.8 billion, more than double the previous month’s total and over four times higher than the same period last year.

“Our estimates based on this data suggest that the import volume was approximately 170-180t, a substantial increase from October’s 86t and the average of 63t over the first 10 months of 2024,” Chacko said.

Over the 11 months of 2024, gold imports rose by 48%, totalling $59 billion, with volumes likely exceeding 800 tons, compared with 689 tons in the same period of 2023, according to WGC.

Courtesy: Investing.com