India’s retail gold demand could rise this month on festival and wedding purchases, says WGC

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A gold jewellery shop in Mumbai's Jhaveri Bazaar. Photo/IAC

India’s retail gold demand could improve in April as consumers accept higher gold price levels after a sluggish March that saw buyers postpone purchases in anticipation of a correction in prices, the World Gold Council (WGC) said.

Demand will also receive support from the festival- and wedding-related purchases during the month and official imports could pick up due to restocking by the trade ahead of the Akshaya Tritiya festival in May, WGC Senior Analyst Mukesh Kumar said in a note.

Retail demand remained sluggish during March as buyers postponed purchases in anticipation of a correction in the gold price. An absence of weddings in the month further dented demand, WGC said, adding that wholesale purchases by retailers and manufacturers remained muted in March as they opted to close their books ahead of the financial year-end.

“As a result, Indian official gold imports totalled 15.8t during the month, 90% lower y-o-y and 80% lower m-o-m,” the note said.

March Summary:

  • The domestic gold price ended 1.7% higher in March at Rs51,317/10g
  • Retail demand remained sluggish as buyers postponed purchases in anticipation of a correction in the gold price
  • This widened the local market discount to US$60/oz during the month, compared to a discount of US$14-15/oz at the end of February 
  • Sluggish retail demand and higher gold recycling also depressed official imports to 15.8t in March, 90% lower y-o-y and 80% lower m-o-m 
  • India signed a Comprehensive Economic Partnership Agreement (CEPA) in February, which extends a 1% customs duty concession for up to 200t of bullion imported from the UAE; this will come into effect on 1 May 2022
  • Indian gold ETFs witnessed marginal net inflows of 0.2t in March, primarily driven by a correction in the gold price, which might have spurred investor interest; total holdings of gold ETFs were 36.4t2
  • The Reserve Bank of India (RBI) added 2.4t of gold in March, increasing its total gold reserves to 760.4t.

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