Gold Rush in India: Total Demand This Year Could Reach 850 Tons!

In 2024, gold has emerged as one of the standout performers among commodities, boasting a cumulative surge of over 30% since the year commenced, according to reports from Bloomberg.

 

On Monday, October 21, in the evening hours (Singapore Time), the price of gold denominated in US dollars briefly soared to $2,740.52 per ounce, marking a historic pinnacle that significantly surpasses the previous highs of $2,000 per ounce in 2020 and $1,900 per ounce in 2011. Subsequent to this peak, there was a minor retracement in price; however, it remained elevated above the $2,730 per ounce threshold at the time of reporting.

 

 

 

India has made a significant move by slashing import tariffs on gold and silver from 15% to 6%, while also reducing import duties on platinum and palladium from 14.35% to 5.35%. Analysts are predicting that this decision will keep India's demand for gold robust in the upcoming months.

 

 

As the world's second-largest consumer of gold, India heavily relies on imports to satisfy domestic demand. Data from the World Gold Council (WGC) reveals that between 2016 and 2020, 86% of India's gold supply came from imports, with recycled gold at 13% and mined gold at a mere 1%. Prior to the tariff cuts, India had been witnessing a drop in gold jewelry purchases, with demand in the first half of 2024 plummeting to levels not seen since 2020.

 

 

Following the tariff adjustments, India experienced a surge in gold imports to 140 tons in August, tripling the volume from July. In terms of value, August's gold imports totaled $10.06 billion, a historic high constituting about one-sixth of the country's total trade imports for the month ($64.36 billion).

 

 

However, September saw a sharp decline in India's gold imports to $4.39 billion month-on-month. Nevertheless, Bloomberg notes that the country's strong gold demand could persist, fueled by promising monsoons that may lead to a fruitful crop harvest, potentially boosting disposable income for Indian farmers.

 

 

India, with the world's largest population, holds a deep cultural reverence for gold, viewing it as a store of value, a symbol of wealth and status, and a crucial element in weddings and other celebrations. WGC data indicates that approximately 60% of India's gold demand arises from rural areas, where the enduring appeal of gold is intertwined with its practical aspects of portability and security as an investment.

 

 

As India enters a season of significant festivities and weddings, the purchase of gold and jewelry is expected to accelerate in the weeks ahead. The Hindu festival of Diwali, from October 29 to November 3, will see heightened celebrations, while December and January mark the peak of the wedding season in India.

 

 

Recent data from the Reserve Bank of India, as of October 11, 2024, shows the country's foreign exchange reserves nearing a historical high at $690.4387 billion, bolstering India's gold imports. In the first eight months of the year, the central bank purchased a total of 50 tons of gold, surpassing the net purchases of both 2022 and 2023.

 

 

As of September 19, the bank's gold reserves reached a record 853.6 tons, constituting 9% of its total foreign exchange reserves, up from 7.5% a year ago.

 

 

 

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