Gold demand in India was supported by import duty cuts ahead of the wedding season | commodities

By Sybilla Gross and Atul Prakash

Gold demand in India looks poised for a strong few months as an import duty cut and what is likely to be a booming festival and wedding season boost buying in the world’s second-largest consumer of the precious metal.

Imports tripled to 140 tonnes in August from the previous month, according to the World Gold Council, as the government cut customs duty to 6% from 15%. The positive trend is likely to continue as a generous monsoon this year has improved crop prospects, potentially boosting the disposable income of farmers – a major consumer group.

Jewelery buying will pick up in a few weeks as the world’s most populous nation enters the festive and wedding season – when wearing and gifting gold is considered auspicious. Hindu festivities will culminate with Diwali in November, while December and January will be busy months for marriages.

“Pro-gold policy measures are having a positive impact on the domestic gold market,” said Sachin Jain, regional CEO for India at the World Gold Council.

The changes could help boost gold demand by 50 tonnes or more in the second half of 2024 from last year, he said, adding that total requirements could be between 750 tonnes and 850 tonnes this year. year.

The timing comes after inbound shipments rose just 4.8 percent from a year ago to 305 tons in the first half of this year, according to the Commerce Ministry.

The purchases reinforce the South Asian nation’s position as a global bright spot for physical consumption at a time when jewelry purchases have fallen in top buyer China. Consumers there have faced an economic downturn during what should be one of the busiest times of the year.

With India facing lower local costs, many price-sensitive shoppers are now opting for heavier jewelery pieces, abandoning their long-standing preference for cheaper lightweight items, said Chirag Sheth, senior consultant for South India at Metals Focus. “Suddenly you saw gold 9% cheaper – and all those people who were waiting on the sidelines for prices to come down all rushed into the market.”

It’s not just physical gold that attracts attention. Net additions to Indian gold-traded funds have been positive for four consecutive months, with inflows hitting a record in August, according to the WGC.

As Indians pour trillions of rupees into an increasingly hot local stock market, bullion-backed ETFs have become a portfolio diversifier for the average investor who typically trades only stocks, said Gnanasekar Thiagarajan, director at Commtrendz Risk Management Services.

In India, it’s always “touch and feel,” he said. “We go to the jewelry store, negotiate with the sellers. But for the first time, people are investing in paper gold through the ETF route. It’s a very new experience for the country.”

First publication: September 26, 2024 | 7:51 AM IST