India's gold demand dips 3% to 747.5 tonne in 2023 on high prices; outlook bullish: WGC

Mumbai: India's gold demand witnessed on-year decline of 3 per cent at 747.5 tonnes in 2023, and going ahead the spurt in demand could be anywhere between 800-900 tonnes, if prices hold out and are not significantly volatile, the World Gold Council said in a report.

The country's total gold demand stood at 774.1 tonnes in 2022, according to the World Gold Council (WGC) Gold Demand Trends report 2023.

"India's gold demand in 2023 declined by 3 per cent to 747.5 tonnes, strongly influenced by rising gold prices. Although consumer interest remained high, it lagged trade sentiment. October's price correction during Navratri stimulated a robust consumer response, boosting Diwali sales in November.

"However, demand declined in December as gold prices resumed an upward trend, resulting in a 9 per cent drop in fourth quarter jewellery demand compared to the same period of 2022," WGC Regional CEO, India, Somasundaram PR said..

Price of gold was volatile throughout 2023, with the yellow metal reaching a new high of Rs 61,845 per 10 gm on May 4 in the domestic market and USD 2,083 an ounce in global markets, and this trend continued with the precious metal reaching another high of Rs 61,914 per 10 grams in November 16.

Looking forward to 2024, India's gold demand should benefit from ongoing positive economic conditions and if the prices hold out are not significantly volatile there is likely to be a big spurt in demand which could be anywhere between 800-900 tonnes, he said.

"The subdued demand range of 700-800 tonnes since 2019 attributable to continuous rise in prices, increase in duties, stock market outperformance, near-term elections spending impact and acceptance of elevated price levels, suggest the potential for a spurt in demand in the near future.

However, any short-term impediments to higher demand could arise from another round of sharp price hikes and volatility triggered by global factors," he added.

The total jewellery demand in India dropped by 6 per cent to 562.3 tonnes in 2023, compared to 600.6 tonnes in the previous year, the report stated.

Meanwhile, the total gold investment demand in the country grew by 7 per cent to 185.2 tonnes, compared to 173.6 tonnes in the previous year, the WGC report said.

"Bar and coin investment in India rebounded, growing by 7 per cent to 185 tonnes year-on-year. The fourth quarter demand touched 67 tonnes, 64 per cent above the five-year quarterly average.

"The correction in gold prices led to some robust investment responses in third and fourth quarters, supported by increased interest from physically backed gold ETF investors, setting total holdings in Indian-listed products to a record 42 tonnes by year-end," Somasundaram said.

He said that recycling was 20 per cent higher due to low and supportive higher prices but at 117 tonnes, could be considered the normative expected level.

Total gold imported to India in 2023 was 780.7 tonnes, up by 20 per cent compared to 650.7 tonnes in 2022, according to the report.

"Net gold imports surged by 20 per cent to 780.7 tonnes in 2023, primarily due to substantial inventory building by the trade.

"In 2024, gold imports are likely to be higher than the demand. The various Free Trade Agreements (FTAs) India has inked with many countries are expected to boost gold imports further this year," noted Somasundara