India - The Jewel In The Crown Of Gold Demand

(April 21st, 2022 - Indrabati Lahiri)

Gold jewelry demand in India has rebounded following the loosening of pandemic restrictions.

India has long been one of the leading consumers of gold in the world, with 2021 seeing demand increase about 78% to approximately 797.3 tons. This was a five-year high, according to this gold demand trends report by the World Gold Council. Simultaneously, gold jewelry demand also doubled year-on-year in 2021, to touch a six-year high of about 610.9 tons.

This demand was primarily fueled by urban consumers and tied to weddings and festivals, such as Dhanteras and Dusshera, during which time buying gold is seen as auspicious and is crucial to the social aspect of celebrations.

Along with being a source of financial security as a safe haven asset, gold in India also has deeply cultural, religious and social roots, which forms most of the demand for the yellow metal in the subcontinent.

Country’s share of gold jewelry demand in 2021

India and China account for more than half of overall gold jewelry demand, according to  World Gold Council data.

India and China account for more than half of global gold demand

What is driving gold jewellery demand in India?

India has been facing a lot of pent-up demand in the gold jewellery market over the past couple of years due to the coronavirus pandemic. Severe limitations on festivals, weddings and other social gatherings where the exchange of gold is common meant that gold jewellery sales had seen a considerable slump.

However, with the gradual loosening of restrictions, jewellery demand has perked up; after months of social distancing, investors were ready to go the extra mile when it came to splurging for festivals such as Diwali.

Consumer sentiment towards the precious metal also improved significantly. This was largely due to the country’s gold market becoming more organized and sophisticated.

According to Somasundaram PR, regional CEO, India, at the World Gold Council, from this year onwards, gold consumption is likely to touch around 800-850 tons.

What role does digital gold have to play?

Gold demand in India has primarily been driven by senior investors, for whom it largely plays the role of a safe haven asset during times of volatility and when experiencing financial duress. However, in an effort to interest Indian youth in bullion investment, the concept of digital gold has emerged more recently.

Digital gold can be purchased online, with lower investments than physical gold and the benefit of having an established company buy it for you and store it in their own vault. This provides a degree of safety and reliability as, in a lot of cases, the quality of gold comes into question.