Gold demand is set to hit new records this festive season. What’s special is that the price increase is now even higher after the reduction in import duties in the budget. Nonetheless, experts believe demand for gold will hit a record high during the holiday season.
In fact, gold prices in the country rose by 4.2% per gram in a month and have since crossed Rs 74,000 per 10 grams. With import duties reduced, it has become easier to import gold from abroad. It is expected that holiday gold demand may increase by 30% this year.
Gold imports grow strongly
India’s gold imports more than tripled in August after lowering gold import duties in the budget. If we understand the growth in imports from the Commerce Ministry data, the monthly imports in August were Rs 8,40,004.53 crore. In July, the country imported gold worth 260,002.76 billion rupees.
The main reason for this increase is the underlying demand during the festive season. Following this, 4.2 million weddings will be held in the country till December, which will also increase the demand for gold. According to the All India Traders Federation, these weddings will cost around 550 crore rupees.
Gold jewelery is also listed among the top three industries accounting for the largest share of this expenditure. Experts say the dollar is weakening due to the Federal Reserve’s decision to cut interest rates by half a percentage point.
Gold ETF investment is also growing rapidly
In this situation, the shine of other asset classes including gold has suddenly increased and hence people want to buy gold coins and bars along with jewellery. Investors are also withdrawing some funds from the country’s stock market and buying gold so that if there is a market correction, they can keep part of their investment safe in the form of gold.
Investment in gold exchange-traded funds also increased. Net inflows of ETF gold into the country increased by 80% in July compared with June, reaching 1,304 billion rupees. This is the largest monthly ETF investment in four and a half years since February 2020.
The Reserve Bank of India said that the gold investment trend will continue in the future. As of August, the Reserve Bank of India had purchased 8.2 tons of gold, bringing the bank’s annual purchases to 44.3 tons. This is the highest level of buying in two years, taking the total gold held by the Reserve Bank of India to 849 tons. This means that demand for gold is increasing across the country, from the common man to the Reserve Bank of India.
