The Indian gold market is experiencing strong momentum driven by both international price trends and domestic factors. Domestic gold prices have risen by 3.9% in August, mirroring a 3.7% rise in international prices, with further gains expected as interest rates ease globally. Despite this, domestic prices are still 2% below pre-Union Budget levels due to a reduction in import duties.
Key Highlights:
Strong Demand: Consumer demand remains robust, supported by festive season buying and rural interest, with expectations of continued strength due to favorable economic conditions.
ETF Inflows: Indian gold ETFs saw record inflows in August, reaching INR 21bn (~US$238mn), driven by changes to capital gains taxation and strong gold price performance. Assets under management in gold ETFs have risen by 54% year-on-year.
RBI Accumulation: The Reserve Bank of India has added 50 tons of gold to its reserves this year, marking a significant increase from previous years, with reserves now accounting for 9% of its foreign holdings.
Record Imports: Gold imports surged to US$10.1bn in August, a threefold increase from the previous month, driven by the reduction in import duties and seasonal demand.
Overall, the gold market in India is benefiting from both global price trends and domestic factors, with ETFs, central bank purchases, and strong consumer demand playing key roles in driving growth.
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