India’s Gold Rush: Consumers and Central Banks Drive Demand Amidst Global Uncertainty

In a significant boost to the country’s gold market, India’s gold imports have more than doubled in March, reaching 52 tonnes. This surge in demand comes as jewellery sales are expected to sustain, driven by a decrease in gold prices and growing consumer confidence.

According to data from the World Gold Council, India’s gold imports have seen a sharp rebound in March, following two consecutive months of decline. This uptick in demand is attributed to the increasing interest in gold, even at elevated prices.

Despite record high prices, gold imports have rebounded sharply in March, with estimates suggesting a range of 47-52 tonnes. This is a significant increase from the 15 tonnes imported in February.

The rise in gold imports is also driven by the increasing trend of consumers exchanging old gold jewellery for new, as a way to moderate the impact of price rallies. This shift in consumer behaviour, as observed by the World Gold Council, suggests that 40-45 per cent of purchases now involve some form of exchange.

Central Banks and Gold Reserves

Not only are consumers driving the demand for gold, but central banks are also adding to their gold reserves. The Reserve Bank of India (RBI) has resumed its gold purchases, adding 0.6 tonnes to its reserves in March. This brings the RBI’s total gold holdings to 880 tonnes, accounting for 12 per cent of its total foreign exchange reserves.

Market Outlook

Experts predict that gold prices will remain bullish, supported by strong central bank purchases and geopolitical uncertainties. With ongoing trade tensions and rate cut expectations, gold is expected to remain a favoured asset in the coming months.

As Navneet Damani, Group Senior Vice-President at Motilal Oswal Financial Services, noted, “Barring any significant resolution in global trade tensions, we maintain a ‘buy on dips’ view from a medium to long-term perspective.”

Satish Dondapati, Fund Manager at Kotak Mahindra AMC, also echoed this sentiment, stating that gold prices will remain supported by strong central bank purchases and geopolitical uncertainties.