India's gold demand set to hit five-year low in 2025
What's the story
India's gold consumption is expected to hit a five-year low in 2025, according to the World Gold Council (WGC). The decline is mainly due to record-high prices that are affecting jewelry demand. Despite a slight increase in investment demand, it isn't enough to counterbalance the overall drop. The WGC estimates that gold demand will be between 600 and 700 metric tons, down from last year's figure of 802.8 tons.
Market dynamics
Prices and geopolitical tensions could impact demand
Sachin Jain, CEO of WGC's Indian operations, told Reuters that if prices stabilize, demand could reach 700 tons. However, a 10%-15% increase in prices due to geopolitical tensions could bring it down to the lower end of the range. Local gold prices hit a record high of ₹101,078 per 10gm in June and have risen by 28% so far this year after a 21% gain last year.
Consumption patterns
Q2 demand down 10% YoY, September quarter may also decline
The WGC reported a 10% year-on-year (YoY) decline in India's gold consumption for the April-to-June quarter, at 134.9 tons. This was driven by a 17% drop in jewelry demand, even as investment demand rose by 7% during the same period. Jain also expects the September quarter's demand to be lower than last year's figure of 248.3 tons, when New Delhi's import duty cuts had boosted purchases.
Investment shift
Gold ETFs are gaining traction among investors
Despite the challenges, gold has been outperforming other asset classes, attracting investors who prefer physical gold and gold exchange-traded funds (ETFs). Jain noted that "Gold ETFs in India are at a very important cusp for growth." He added that as India becomes more digitized, these investment vehicles are gaining popularity. Data from the Association of Mutual Funds in India showed that gold ETFs in India saw inflows surge 10-fold month-on-month to ₹20.81 billion in June, hitting a five-month high.