Gold demand likely to be subdued: Report

By: |
October 20, 2021 8:26 AM

The market development organisation for the gold industry added that imports remained strong and retail demand was expected to pick up as restrictions were gradually lifted across the country.

gold priceThe report, ‘The drivers of Indian gold demand’, mentioned that rising incomes were one of the biggest single drivers of long-term gold demand.

Demand for gold in India may be more subdued than expected this year, following India’s prolonged battle with Covid-19, read a report by the World Gold Council (WGC). India is the second largest consumer of gold in the world after China.

The market development organisation for the gold industry added that imports remained strong and retail demand was expected to pick up as restrictions were gradually lifted across the country. It stated that in 2022, economic growth and the impact of pent-up demand for gold were likely to indicate a period of robust demand, although any future outbreaks of coronavirus could create further uncertainties.

The report, ‘The drivers of Indian gold demand’, mentioned that rising incomes were one of the biggest single drivers of long-term gold demand. This suggests that as India’s economy grows, demand for gold should increase.

According to the report, rapid growth in the working age population over the next two decades will create a strong and sustained demographic dividend. Continued urbanisation will drive and support economic expansion, and finally higher penetration of both the manufacturing and services sectors in rural areas will reduce their reliance on agriculture, and deliver more stable incomes for millions of households.

However, the study also pointed out that the Indian gold market faced several challenges. Households are saving proportionately less than they used to, which may reduce the amount of capital they allocate for gold.

Financial inclusion is increasing, which provides investors with other sources for their savings beyond physical gold. Government policies can impact demand and inadvertently foster India’s unofficial market and finally agricultural wages are still in the decline, despite government actions in recent years.

According to the last ‘Gold Demand Trends’ report,demand for gold in India for Q2 (April-June) 2021 was at 76.1 tonne, an increase of 19.2% as compared to overall Q2 demand for 2020 of 63.8 tonne. Total gold imports in India in Q2 2021 were 120.4 tonne, as compared to 10.9 tonne in Q2 2020, an increase of 1004%.

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