The World Gold Council (WGC) has increased its projection for India’s gold consumption in 2024 from 750 tonnes to 850 tonnes. The rise in demand is attributed to a favorable monsoon season and a reduction in gold import duties. John Reade, Market Strategist for Europe and Asia at the World Gold Council, highlighted these factors as key drivers for the increase.
Factors Driving Increased Gold Demand
- Jewelry Demand: According to Reade, jewelry will be the primary driver of this increased gold demand in India for the year 2024.
- Monsoon Impact: A good monsoon season has positively influenced agricultural income, leading to higher disposable income for rural households, traditionally significant buyers of gold.
- Duty Reduction: The Indian government’s decision to reduce the import duty on gold from 15% to 6% in the Union Budget on July 23 has led to an immediate increase in gold demand.
Quarterly Gold Demand Trends
- July-September Quarter: The WGC expects gold demand in India to reach 230 tonnes in the July-September quarter, representing a 10% year-on-year increase.
- October-December Quarter: The demand is anticipated to continue its upward trend during the festive season, particularly during the Diwali-Dhanteras period.
- April-June Quarter: Despite the recent positive trends, gold demand fell by 5% year-on-year to 158.1 tonnes in the April-June quarter, primarily due to high import duties before the recent reduction.
Gold as a Financial Instrument
Reade also noted a significant shift in how gold is perceived and used in India. He mentioned the growing popularity of gold exchange-traded funds (ETFs), which are becoming an increasingly important financial instrument. Currently, around 50 tonnes of gold are held in ETFs in India, but this figure is expected to rise in the coming years.
Potential Risks and Global Factors
Despite the positive outlook, Reade cautioned that there could be a significant swing in gold prices in early November, coinciding with the U.S. Presidential election. Given that India relies entirely on imports for its gold consumption, any changes in international prices will directly affect the cost of gold in India.
Multiple-Choice Questions (MCQs):
- What is the revised projection for India’s gold consumption in 2024 according to the World Gold Council?
- A) 750 tonnes
- B) 800 tonnes
- C) 850 tonnes
- D) 900 tonnes
Answer: C) 850 tonnes
- What factors are driving the increased demand for gold in India in 2024?
- A) Higher interest rates
- B) Good monsoon and duty cut on gold
- C) Economic recession
- D) Increased oil prices
Answer: B) Good monsoon and duty cut on gold
- Which sector is expected to drive the higher demand for gold in India according to John Reade?
- A) Electronics
- B) Automotive
- C) Jewelry
- D) Real estate
Answer: C) Jewelry
- What was the gold demand in India during the July-September quarter of 2024?
- A) 150 tonnes
- B) 180 tonnes
- C) 200 tonnes
- D) 230 tonnes
Answer: D) 230 tonnes
- By how much did gold demand fall in the April-June quarter of 2024?
- A) 2%
- B) 5%
- C) 10%
- D) 15%
Answer: B) 5%