A report released by the World Gold Council (WGC) on Friday said that since the peak Diwali buying season, jewellery demand has been lacklustre as gold price fluctuations have kept consumers on the sidelines despite the onset of the wedding season but investment demand for the yellow metal in the form of coins and bars has shown steady growth.
The positive sentiment around gold prices and its appeal as an investment asset have likely supported this trend, which is expected to continue, said the report.
In the near term, demand could face pressure due to the upcoming inauspicious period for purchasing gold, as per the Hindu calendar, which runs from mid-December to mid-January. Nonetheless, there are expectations of some demand from holiday purchases, particularly from non-resident Indians visiting the country during this period.
November’s Indian gold ETF inflows, while lower than the record levels seen in October, remained strong and surpassed the average monthly inflow for 2024. The continued positive sentiment towards gold, coupled with volatility in domestic equity markets, likely fuelled these inflows, even as major global markets experienced outflows.
According to the Association of Mutual Funds in India (AMFI), gold ETFs saw net inflows of Rs12.6bn (US$149mn) in November, well above this year’s average monthly inflows of Rs 9.6bn (US$115mn).
Total assets under management (AUM) in Indian gold ETFs stood at Rs 442bn(US$5.2bn) at the end of November, a 60% y/y growth. Additionally, collective gold holdings in ETFs grew to 56.6t, marking a 35% y/y growth.
The strong inflows into gold ETFs this year underscore heightened investor interest, with inflows recorded in every month except April. Over the first 11 months of 2024, net inflows into gold ETFs amounted to INR106bn(~US$1265mn), a 3.7-fold increase from last year. During this period, 14.5t of gold was added to the cumulative holdings of these funds. Three new gold ETFs were launched in India this year, bringing the total number of physically backed funds available in the local market to 18.
The Reserve Bank of India further added to its gold reserves in November, bringing its total holding to 876t, a 9% increase from the previous year. According to the bank’s data and to WGC’s own estimates, 8.4t was added to its gold holdings in November.
This marks the 11th consecutive month of gold purchases, with an average monthly acquisition of 6.6t. So far in 2024, the RBI has added 72.6t to its gold reserves significantly outpacing the 16t added in 2023 and the 33t in 2022. Gold now represents 10.2% of the RBI’s forex reserves, up from 7.8% a year ago.
