Despite a decline in import, jewelry and ETF demand in December 2024, gold was India’s best-performing asset last year. Stable prices are expected to boost jewelry demand during the current wedding season, according to Kavita Chacko, Head of India Research at the World Gold Council (WGC).
In the latest WGC update, Chacko highlighted gold as the “winner” in 2024: “Despite the correction in gold prices in November and December, gold remained the top-performing asset class in India with a 21% year-on-year growth. However, gold’s return in INR terms was lower than the 26% gain in USD terms.”
Gold prices continued to decline in December, losing 2% after a 4% decline in November, to close at $2,610 an ounce. However, Chacko said this was largely a USD-related phenomenon, with gold prices in India much more stable. “In the domestic market, gold ended December down 0.4% amid volatile prices. Domestic jewelry demand has been sluggish since December.
Consumers are hesitant to buy gold jewellery due to high and volatile prices, as well as the unfavourable period in the Hindu calendar (mid-December to mid-January). The purchases are mainly linked to the wedding season. However, market reports show that investment demand for physical gold such as bars and coins remains strong, underscoring the investment appeal of gold," Chacko said.
This low demand is also reflected in the price difference between domestic and international gold. “Since December, domestic gold prices have been trading at a discount to international prices, with an average decrease of $4 per ounce and recently increasing to $15 per ounce,” she said.
Gold ETFs in India recorded positive net inflows in December, marking the eighth consecutive month, but the increase has slowed.
“Indian gold ETFs recorded net inflows of INR 6.4 billion (~US$75 million) in December, down nearly 50% from the previous month and 32% below the year-to-date monthly average of INR 9.4 billion (~US$112 million),” Chacko said.
In total, gold ETFs attracted an all-time net inflow of INR 112 billion (~US$1.3 billion) in 2024, nearly four times the previous year. Assets under management (AUM) increased 63% year-on-year to INR 446 billion (~US$5.2 billion).
The Reserve Bank of India (RBI) halted gold purchases in December after accumulating 72.6 tonnes in 2024, taking its total reserves to 876 tonnes. “Nearly a third of the gold was purchased in October and November, marking a significant increase from the 16.2 tonnes purchased in 2023,” Chacko said.
On imports, the data has been revised down significantly. “Data from the Indian Ministry of Commerce shows that gold imports from April to November 2024 were down 82 tonnes from the original estimate, mainly due to double counting issues when converting data between platforms,” Chacko explained.
Notably, the World Gold Council predicts that jewelry demand will gradually recover from mid-January thanks to wedding shopping and stable gold prices. “The recent investment trend is expected to continue,” Chacko affirmed.
